LIBRARY 

THE  UNIVERSITY 
OF  CALIFORNIA 

SANTA  BARBARA 


PRESENTED  BY 


ELIZABETH  HARDISON 


A  HISTORY  OF 

ECONOMIC  DOCTRINES 


A  iHISTORY  OF 

ECONOMIC  DOCTRINES 

FROM  THE  TIME  OF  THE  PHYSIOCRATS 
TO  THE  PRESENT  DAY 

BY  CHARLES  GIDE 

PROFESSOR    OF    SOCIAL     ECONOMICS    IN    THE 
FACULTY     OF     LAW     UNIVERSITY    OF     PARIS 

AND 

CHARLES    RIST 

PROFESSOR   OF    POLITICAL    ECONOMY   IN   THE 

FACULTY    OF    LAW    IN    THE    UNIVERSITY    OF 

MONTPELLIER 

AUTHORISED  TRANSLATION  FROM  THE  SECOND  REVISED 
AND  AUGMENTED  EDITION  OP  1913 

UNDER  THE   DIRECTION  OF  THE   LATE 

PROFESSOR    WILLIAM     SMART 
BY 

R.    RICHARDS    B.A. 

LECTURER  IN  THE  UNIVERSITY  COLLEGE  OF 
NORTH  WALES 


D.   C.   HEATH  AND   COMPANY 

BOSTON  NEW  YORK  CHICAGO 

DALLAS     ATLANTA     LONDON      SAN  FRANCISCO 


rights  reserved 


Printed  in  Great  Britain  at  THE  BALLANTYNE  PRESS  by 

SPOTTUWOODE.  BALLANTYNE  &  Co.  LTD. 

Colchester,  London  &  Eton 


PREFATORY  NOTE 

GIBE'S  Principles  of  Political  Economy,  of  which  there  are  several 
translations,  is  probably  better  known  to  English  students  than 
any  similar  work  of  foreign  origin  on  the  subject,  and  many 
readers  of  that  book  will  welcome  an  opportunity  of  perusing  this 
volume  which  Professor  Gide  has  produced  in  collaboration  with 
Professor  Rist. 

The  remarkable  dearth  of  literature  of  this  kind  in  English 
may  be  pleaded  in  further  extenuation  of  the  attempt  to  present 
the  work  in  an  English  garb,  and  readers  of  the  Preface  will  be 
able  to  contrast  the  position  in  this  country  with  the  very 
different  condition  of  things  prevailing  across  the  Channel.  The 
contrast  might  even  be  carried  a  stage  farther,  and  it  would 
be  interesting  to  speculate  upon  the  historical  causes  which 
have  made  Germany  supreme  in  the  field  of  economic  research 
and  history,  which  influenced  France  in  her  choice  of  the 
history  of  theory,  and  which  decreed  that  England  should  on 
the  whole  remain  faithful  to  the  tradition  of  the  "  pure 
doctrine."  Can  it  be  that  something  like  a  "  territorial 
division  of  labour"  applies  in  matters  intellectual  as  well  as 
economic  ? 

Be  that  as  it  may,  we  can  hardly  pretend  to  be  satisfied  with  the 
position  of  our  country  in  this  matter  of  doctrinal  history.  Of  the 
nine  names  mentioned  in  the  Preface,  only  two  are  English,  namely, 
Ashley  and  Ingram;  and  it  is  no  disparagement  to  Ashley's  illu- 
minating study  of  mediaeval  England  to  say  that  the  main  interest  of 
his  work  is  not  doctrinal,  and  that  Cunningham's  name  might  with 
equal  appropriateness  have  been  included  in  the  list. 

Omitting  both  Ashley  and  Cunningham,  whose  labours  have  been 
largely  confined  to  the  realm  of  economic  history,  we  are  thus  left 
with  Ingram's  short  but  learned  work  as  the  sole  contribution  of 
English  scholarship  to  the  history  of  economic  thought. 

English  readers  may  possibly  be  puzzled  by  the  omission  of 
any  references,  except  a  stray  quotation  or  two,  to  Cannan's  History 
of  the  Theories  of  Production  and  Distribution.  But  the  microscopic 
care  with  which  the  earlier  theories  are  examined  and  elucidated  in 
that  work  have  resulted  in  its  being  regarded  as  a  most  valuable 
contribution  to  economic  theory  itself,  and  under  the  circumstances 


vi  PREFATORY  NOTE 

the  absence  of  any  reference  to  it  in  the  Preface  is  not  altogether 
surprising. 

Our  apparent  indifference  to  the  development  which  theory 
has  undergone  in  the  course  of  the  last  150  years  is  all  the  more 
difficult  to  explain  when  we  recall  the  fact  that  England  has  always 
been  the  classic  home  of  theory,  both  orthodox  and  socialist,  and 
our  backwardness  in  this  respect  contrasts  very  unfavourably  with 
the  progress  made  in  the  kindred  study  of  economic  history  during 
the  last  twenty-five  years  under  the  inspiration  of  writers  like 
Ashley,  Cunningham,  Maitland,  Round,  and  Seebohm. 

Most  critics  are  by  this  time  agreed  that  Ingram's  work,  lucid 
and  learned  though  it  is,  is  somewhat  marred  by  being  written  too 
exclusively  from  the  standpoint  of  a  Positivist  philosopher  who 
thought  he  saw  in  the  rapid  rise  of  the  Historical  school  an  indis- 
putable proof  of  the  soundness  of  the  Comtean  principles  and  a 
presage  of  their  ultimate  triumph. 

Complete  impartiality  in  the  writing  of  history,  even  were  it 
attainable,  may  not  be  altogether  desirable,  and  the  present  authors 
have  hastened  to  disclaim  any  such  qualification.  Notwithstanding 
this,  some  of  their  readers  will  possibly  feel  that  certain  French 
Schools,  both  ancient  and  modern,  have  been  dealt  with  at  dispro- 
portionate length,  and  that  scarcely  enough  attention  has  been  paid  to 
certain  English  and  American  writers.  But  it  will  surely  do  us  little 
harm  occasionally  "  to  see  ourselves  as  others  see  us." 

The  chief  interest  of  the  present  volume  will  probably  be  found  to 
consist  in  the  attempt  made  to  give  us  something  like  a  true  per- 
spective of  certain  modern  theories  by  connecting  them  with  their 
historical  antecedents  ;  and  we  can  imagine  its  later  pages  being 
scanned  with  a  great  deal  of  justifiable  curiosity.  After  all,  the 
verdict  of  history  upon  the  achievements  of  Smith,  the  measure  of 
his  indebtedness  to  his  immediate  predecessors,  and  the  extent  to 
which  the  "  car  of  economic  progress "  was  accelerated  or  retarded 
in  its  movements  at  the  hands  of  Ricardo  and  his  contemporaries  is 
fairly  well  established  by  this  time.  On  one  point  only  do  the  present 
writers  seem  to  challenge  that  verdict,  namely,  in  their  designation  of 
Ricardo  and  Malthus  as  Pessimists. 

It  is  otherwise  with  the  more  modern  writers,  however.  Their 
work  has  not  the  distinctness  of  that  of  the  earlier  writers,  partly 
because  we  are  not  sufficiently  removed  from  it  as  yet,  and  partly 
because  some  of  it  is  obscured  by  the  haze  of  party  strife.  But  it 
may  help  us  to  a  better  understanding  of  their  relative  positions  to 
learn,  for  example,  that  the  Historical  school,  which  set  out  on  its 


PREFATORY  NOTE  vii 

career  of  conquest  with  a  considerable  flourish  of  trumpets,  has  not 
yet  succeeded  in  giving  us  a  new  science  of  Political  Economy ;  that 
the  Marxian  doctrine  is  already  antiquated,  in  the  opinion  of  certain 
members  of  that  school ;  that  the  Socialism  of  the  Fabian  Society  is 
merely  a  recrudescence  of  Ricardian  economics,  and  that  Anarchism 
is  nothing  but  a  violent  form  of  Liberalism. 

I  cannot  hope  to  have  succeeded  in  retaining  in  this  translation 
the  freshness  and  vivacity  of  the  original.  But  I  have  endeavoured 
to  make  the  rendering  as  accurate  as  possible ;  and  with  this  object 
in  view  considerable  trouble  has  been  taken  to  verify  the  quotations. 

As  the  title-page  implies,  the  work  was  originally  begun  at  the 
suggestion  of  the  late  Professor  Smart  of  Glasgow,  and  to-day  more 
than  ever  I  am  conscious  of  what  I  owe  to  his  kindly  criticism  and 
genial  encouragement. 

The  passage  of  the  book  through  the  press  has  been  watched  with 
assiduous  care  by  Mr.  C.  C.  Wjjod,  who  is  also  responsible  for  the 
Index  at  the  end  of  the  volume.  I  can  scarcely  express  the  measure 
of  my  indebtedness  to  him.  To  my  friends  Mr.  W.  H.  Porter,  M.A., 
and  Mr.  J.  G.  Williams,  M.A.,  both  of  Bangor,  I  am  also  indebted 
for  reading  some  of  the  proofs. 

R.  RICHARDS 


PREFACE 

IN  the  economic  curricula  of  French  universities  much  greater 
stress  is  laid  upon  the  history  of  economic  theory  than  is  the  case 
anywhere  else.  Attached  to  the  Faculty  of  Law  in  each  of  these 
universities  is  a  separate  chair  specially  devoted  to  this  subject ;  at 
the  examination  for  the  doctor's  degree  a  special  paper  is  set  in  the 
history  of  theory,  and  if  necessary  further  proof  of  competence  is 
demanded  from  the  student  before  his  final  admission  to  the  degree. 
At  the  Sorbonne,  where  there  is  only  one  chair  in  economics,  that 
chair  is  exclusively  devoted  to  the  history  of  doctrines,  and  the  same 

-Jf-.  -Jt» 

is  true  of  the  chair  recently  founded  at  the  Ecole  des  Hautes  Etudes. 

Such  prominence  given  to  the  history  of  theory  must  seem 
excessive,  especially  when  it  is  remembered  that  in  economic 
history,  as  distinct  from  the  history  of  economics,  there  is  not  a 
single  chair  in  the  whole  of  France.  Those  who  believe  that  the 
French  people  are  somewhat  prone  to  ideology  will  not  fail  to  see 
in  this  fact  a  somewhat  unfortunate  manifestation  of  that  tendency. 
Elsewhere  the  positions  are  reversed,  the  premier  place  being  given 
to  the  study  of  facts  rather  than  ideas.  Extreme  partisans  of  the 
historical  method,  especially  the  advocates  of  historical  materialism, 
regard  doctrines  and  systems  as  nothing  better  than  a  pale  reflection 
of  facts.  It  is  a  part  of  their  belief  that  facts  are  the  only  things 
that  matter,  and  that  the  history  of  the  evolution  of  property  or  the 
rise  of  the  wage  system  may  prove  quite  as  instructive  as  the  history 
of  the  controversies  concerning  the  nature  of  the  right  of  property 
or  the  wages-fund  theory. 

Such  views  as  we  have  just  expressed,  however,  are  not  altogether 
devoid  of  exaggeration,  though  of  a  kind  directly  opposite  to  that 
which  we  would  naturally  impute  to  them.  The  influence  exerted 
by  the  economic  environment,  whence  even  the  most  abstract 
economist  gets  material  for  reflection  and  the  exercise  of  his  logical 
acumen,  is  indisputable.  The  problems  which  the  theorist  has  to 
solve  are  suggested  by  the  rise  of  certain  phenomena  which  at  one 
moment  cut  a  very  prominent  figure  and  at  another  disappear 
altogether.  Such  problems  must  vary  in  different  places  and  at 
different  times.  The  peculiar  economic  condition  in  which  England 
found  herself  at  the  beginning  of  the  nineteenth  century  had  a  great 

ix 


x  PREFACE 

deal  to  do  in  directing  Ricardo1s  thought  to  the  study  of  the  problems 
of  rent  and  note  issue.  But  for  the  advent  of  machinery,  with  the 
subsequent  increase  in  industrial  activity  and  the  parallel  growth 
of  a  proletarian  class,  followed  by  the  recurrence  of  economic  crises, 
we  may  be  certain  that  neither  the  doctrine  of  Sismondi  nor 
that  of  Karl  Marx  would  ever  have  seen  the  light  of  day.  It  is 
equally  safe  to  assume  that  the  attention  which  economists  have 
recently  bestowed  upon  the  theory  of  monopoly  is  not  altogether 
unconnected  with  the  contemporary  development  of  the  trust 
movement. 

But,  while  recognising  all  this,  it  is  important  that  we  should 
remember  that  facts  alone  are  not  sufficient  to  explain  the  origin 
of  any  doctrines,  even  those  of  social  politics,  and  still  less  those  of 
a  purely  scientific  character.  Ideas  even  are  not  independent  of 
time  and  place.  Similar  conditions  in  the  same  epoch  of  history 
have  not  infrequently  given  rise  to  heterogeneous  and  even  antago- 
nistic theories — J.  B.  Say's  and  Sismondi's,  for  example,  Bastiat's 
and  Proudhon's,  Schulze-Delitzsch's  and  Marx's,  Francis  Walker's 
and  those  of  Henry  George.  With  what  combination  of  historical 
circumstances  are  we  to  connect  Cournofs  foundation  of  the 
Mathematical  school  in  France,  or  how  are  we  to  account  for  the 
simultaneous  discovery  in  three  or  four  countries  of  the  theory  of 
final  utility  ? 

Although  anxious  not  to  seem  to  make  any  extravagant  claims 
for  the  superiority  of  the  history  of  theory,  we  are  not  ashamed  of 
repeating  our  regrets  for  the  comparative  neglect  of  economic 
history,  and  we  are  equally  confident  in  claiming  for  our  subject 
the  right  to  be  regarded  as  a  distinct  branch  of  the  science.1  We 
shall  accordingly  omit  all  reference  to  the  history  of  economic  facts 
and  institutions  except  in  so  far  as  such  reference  seems  indispensable 
to  an  understanding  of  either  the  appearance  or  disappearance  of  such 
and  such  a  doctrine  or  to  the  better  appreciation  of  the  special 
prominence  which  a  theory  may  have  held  at  one  moment,  although 
it  is  quite  unintelligible  to  us  to-day.  Sometimes  even  the  facts 
are  connected  with  the  doctrines,  not  as  causes,  but  as  results,  for, 
notwithstanding  the  scepticism  of  Cournot,  who  was  wont  to  declare 
that  the  influence  exerted  by  economists  upon  the  course  of  events 
was  about  equal  to  the  influence  exerted  by  grammarians  upon 
the  development  of  language,  it  is  impossible  not  to  see  a  connection 
between  the  commercial  treaties  of  1860,  say,  and  the  teachings  of 

1  See  an  article  by  M.  Deschamps  in  the  Reforms  sociale  of  October  1, 1902, 
on  the  value  of  this  kind  of  teaching. 


PREFACE  xi 

the  Manchester  school,  or  between  labour  legislation  and  the  doctrine 
of  State  Socialism. 

To  write  a  history  of  economic  doctrines  which  should  not 
exceed  the  limits  of  a  single  volume  was  to  attempt  an  almost 
impossible  task,  and  the  authors  cannot  pretend  that  they  have 
accomplished  such  a  difficult  feat.  Even  a  very  summary  exposition 
of  such  doctrines  as  could  not  possibly  be  neglected  involved  the 
omission  of  others  of  hardly  less  importance. 

But  in  the  first  place  it  was  possible  to  pass  over  the  pioneers  by 
taking  the  latter  part  of  the  eighteenth  century  as  the  starting-point. 
There  is  no  doubt  that  the  beginnings  of  economic  science  lie  in  a 
remoter  past,  but  the  great  currents  of  economic  thought  known  as 
the  "  schools  "  only  began  with  the  appearance  of  those  two  typical 
doctrines,  individualism  and  socialism,  in  the  earlier  half  of  the  nine- 
teenth century.1  Moreover,  the  omission  is  easily  made  good,  for 
it  so  happens  that  the  earlier  periods  are  those  most  fully  dealt  with 
in  such  works  as  have  already  appeared  on  the  subject.  For  the 
period  of  antiquity  we  have  the  writings  of  Espinas 2  and  Souchon  ; 
the  mediaeval  and  post-mediaeval  periods,  right  up  to  the  eighteenth 
century,  are  treated  of  in  the  works  of  Dubois  and  Rambaud ; 
while,  in  addition  to  these,  we  have  the  writings  of  Ashley,  Ingram, 
Hector  Denis,  Brants,  and  Cossa,  to  mention  only  a  few.  Modern 
theories,  as  contrasted  with  those  of  the  earlier  periods,  have  received 
comparatively  little  attention. 

Not  only  have  we  been  obliged  to  confine  our  attention  to 
certain  periods,  but  we  have  also  had  to  restrict  ourselves  to  certain 
countries.  We  would  claim  the  indulgence  of  those  of  our  readers 
who  feel  that  French  doctrines  have  been  considered  at  dispropor- 
tionate length,  reminding  them  that  we  had  French  students 
chiefly  in  view  when  writing.  Each  author  is  at  liberty  to  do  the 
same  for  his  own  particular  country,  and  it  is  better  so,  for  readers 
generally  desire  to  learn  more  about  those  things  of  which  they 
already  know  something.  But,  despite  the  prominence  given  to 
France,  England  and  Germany  were  bound  to  receive  considerable 
attention,  although  in  the  case  of  the  latter  country  we  had  to 

1  In  an  article  on  the  teaching  of  the  history  of  economic  doctrines  (Revue 
de  V Enseignement,  March  15,  1900)  M.  Deschamps  declares  that  it  is  unpardon- 
able that  we  should  be  unable  to  make  better  use  of  the  marvellous  economic 
teachings  of  which  both  ancient  and  mediaeval  history  are  full,  but  he  adds 
that  "  as  far  as  the  history  of  the  science  is  concerned  there  is  no  need  to  go 
farther  back  than  the  Physiocrats." 

2  In  the  new  edition  of  M.  Espinas's  work  an  entire  volume  is  devoted  to  the 
study  of  economic  doctrines  in  ancient  and  mediaeval  times. 


xii  PREFACE 

make  considerable  omissions.  With  regard  to  the  other  countries, 
which  we  were  too  often  obliged  to  pass  by  in  silence  or  to  mention 
only  very  casually  in  connection  with  some  theory  or  other,  we  are 
most  anxious  not  to  appear  indifferent  to  the  eminent  services 
rendered  by  them,  and  especially  Italy  and  the  United  States,  to 
the  cause  of  economic  science,  both  in  the  past  and  in  the  present. 

But,  notwithstanding  such  restrictions,  the  field  was  still  too  wide, 
and  we  were  obliged  to  focus  attention  on  the  minimum  number  of 
names  and  ideas,  with  a  view  to  placing  them  in  a  better  light.  Our 
ambition  has  been,  not  to  write  as  full  or  detailed  a  history  as  we 
possibly  could,  but  merely  to  draw  a  series  of  pictures  portraying 
the  more  prominent  features  of  some  of  the  more  distinct  epochs  in 
the  history  of  economic  doctrines. 

Such  choice  must  necessarily  be  somewhat  arbitrary,  for  it  is 
not  always  an  easy  matter  to  fix  upon  the  best  representative  of 
each  doctrine.  Especially  is  this  the  case  in  a  science  like  economics, 
where  the  writers,  unknown  to  one  another,  not  infrequently  repeat 
the  same  ideas,  and  it  becomes  a  matter  of  some  difficulty  to  decide 
the  claim  to  priority.  But  although  it  may  be  difficult  to  hit  upon 
the  exact  moment  at  which  a  certain  idea  first  made  its  appearance, 
it  is  comparatively  easy  to  determine  when  such  an  idea  attracted 
general  attention  or  took  its  place  in  the  hierarchy  of  accepted 
or  scarcely  disputed  truths.  This  has  been  our  criterion.  With 
regard  to  those  whose  names  do  not  figure  in  our  list,  although 
quite  worthy  of  a  place  in  the  front  rank,  we  cannot  believe  that 
they  will  suffer  much  through  this  temporary  eclipse,  especially  in 
view  of  the  partiality  of  the  age  for  the  pioneers.  That  we  are  not 
unduly  optimistic  in  this  matter  may  be  inferred  from  the  numerous 
attempts  recently  made  to  discover  the  poetce  minores  of  the  science, 
and  to  make  amends  for  the  scant  justice  done  them  by  the  more 
biased  historians  of  the  past. 

Not  only  was  selection  necessary  in  the  case  of  authors,  but  a 
similar  procedure  had  to  be  applied  to  the  doctrines.  It  must  be 
realised,  however,  that  a  selection  of  this  character  does  not  warrant 
the  conclusion  that  the  doctrines  dealt  with  are  in  any  way  superior 
to  those  which  are  not  included,  either  from  the  standpoint  of 
moral  value,  of  social  utility,  or  of  abstract  truth,  for  we  are  not 
of  the  number  who  think  with  J.  B.  Say  that  the  history  of  error 
can  serve  no  useful  purpose.1  We  would  rather  associate  ourselves 

1  "  "What  useful  purpose  can  be  served  by  the  study  of  absurd  opinions  and 
doctrines  that  have  long  ago  been  exploded,  and  deserved  to  be  ?  It  is  mere 
useless  pedantry  to  attempt  to  revive  them.  The  more  perfect  a  science  becomes 


PREFACE  xiii 

with  Condillac  when  he  remarks  :  "  It  is  essential  that  everyone  who 
wishes  to  make  some  progress  in  the  search  for  truth  should  know 
something  of  the  mistakes  committed  by  people  like  himself  who 
thought  they  were  extending  the  boundaries  of  knowledge.1'  The 
study  of  error  would  be  thoroughly  well  justified  even  though  the 
result  were  simply  a  healthy  determination  to  avoid  it  in  future.  It 
would  be  even  more  so  if  Herbert  Spencer's  version  of  the  saying  of 
Shakespeare,  that  there  is  no  species  of  error  without  some  germ  of 
truth  in  it,  should  prove  correct.  One  cannot,  moreover,  be  said  to 
possess  a  knowledge  of  any  doctrine  or  to  understand  it  until  one 
knows  something  of  its  history,  and  of  the  pitfalls  that  lay  in  the  path 
of  those  who  first  formulated  it.  A  truth  received  as  if  it  has  fallen 
from  the  sky,  without  any  knowledge  of  the  efforts  whereby  it  has 
been  acquired,  is  like  an  ingot  of  gold  got  without  toil — of  little 
profit. 

Moreover,  it  is  to  be  remembered  that  this  book  is  intended 
primarily  for  students,  and  that  it  may  be  useful  to  show  them  in 
what  respects  certain  doctrines  are  open  to  criticism,  either  from 
the  point  of  view  of  logic  or  of  observation.  We  have  attempted 
to  confine  such  criticism  within  the  strictest  limits,  partly  because  we 
did  not  wish  the  volume  to  become  too  bulky,  and  partly  because 
we  felt  that  what  is  important  for  our  readers  are  not  our  own 
opinions,  but  the  opinions  of  the  masters  of  the  science  with  which 
we  deal.  Wherever  possible  these  have  been  given  tlje  opportunity 
of  speaking  for  themselves,  and  for  this  reason  we  have  not  been 
afraid  to  multiply  quotations. 

A  special  effort  has  been  made  to  bring  into  prominence  such 
doctrines — whether  true  or  false — as  have  contributed  to  the 
formation  of  ideas  generally  accepted  at  the  present  time,  or  such 
as  are  connected  with  these  in  the  line  of  direct  descent.  In  other 
words,  the  book  is  an  attempt  to  give  an  answer  to  the  following 
questions  :  Who  is  responsible  for  formulating  those  principles  that 
constitute  the  framework — whether  provisionary  or  definitive  it  is 
not  for  us  to  determine — of  economics  as  at  present  taught  ?  At 
what  period  were  these  principles  first  enunciated,  and  what  were 
the  circumstances  which  accounted  for  their  enunciation  just  at 
that  period  ?  Thus  we  have  thought  it  not  altogether  out  of  place 
to  pay  some  attention  to  those  ideas  which,  although  only  on 
the  shorter  becomes  its  history.  Al ember t  truly  remarks  that  the  more  light 
we  have  on  any  subject  the  less  need  is  there  to  occupy  ourselves  with  the  false 
or  doubtful  opinions  to  which  it  may  have  given  rise.  Our  duty  with  regard 
to  errors  is  not  to  revive  them,  but  simply  to  forget  them."  (Traitt  pratique, 
vol.  ii,  p.  540.) 


xiv  PREFACE 

the  borderland  of  economics,  have  exercised  considerable  influence 
either  upon  theory  itself,  upon  legislation,  or  upon  economic  thought 
in  general.  We  refer  to  such  movements  as  Christian  Socialism, 
Solidarism,  and  Anarchism.  Had  we  considered  it  advisable  to 
retain  the  official  title  by  which  this  kind  of  work  is  generally  known, 
we  should  have  had  to  describe  it  as  A  History  of  the  Origin  and 
Evolution  of  Contemporary  Economic  Doctrines. 

The  plan  of  a  history  of  this  kind  was  a  matter  that  called  for 
some  amount  of  deliberation.  It  was  felt  that,  being  a  history,  fairly 
close  correspondence  with  the  chronological  order  was  required,  which 
meant  either  taking  a  note  of  every  individual  doctrine,  or  breaking  up 
the  work  into  as  many  distinct  histories  as  there  are  separate  schools. 
The  former  procedure  would  necessitate  giving  a  review  of  a  great 
number  of  doctrines  in  a  single  chapter,  which  could  only  have  the 
effect  of  leaving  a  very  confused  impression  upon  the  reader's  mind. 
The  alternative  proposal  is  open  to  the  objection  that,  instead  of 
giving  us  a  general  outline,  it  merely  treats  us  to  a  series  of  mono- 
graphs, which  prevents  our  realising  the  nature  of  that  fundamental 
unity  that  in  all  periods  of  history  binds  every  doctrine  together, 
similar  and  dissimilar  alike.  We  have  attempted  to  avoid  the  in- 
conveniences and  to  gain  something  of  the  advantages  offered  by  these 
alternative  methods  by  grouping  the  doctrines  into  families  according 
to  their  descent,  and  presenting  them  in  their  chronological  order. 
This  does  not  mean  that  we  have  classified  them  according  to  the 
date  of  their  earliest  appearance ;  it  simply  means  that  we  have 
taken  account  of  such  doctrines  as  have  reached  a  certain  degree  of 
maturity.  There  is  always  some  culminating-point  in  the  history  of 
every  doctrine,  and  in  deciding  to  devote  a  separate  chapter  to  some 
special  doctrine  we  have  always  had  such  a  climacteric  in  mind. 
Nor  have  we  scrupled  to  abandon  the  chronological  order  when 
the  exigencies  of  the  exposition  seemed  to  demand  it. 

The  first  epoch  comprises  the  end  of  the  eighteenth  and  the 
beginning  of  the  nineteenth  centuries.  It  deals  mainly  with  the 
founders  of  Classical  political  economy,  with  the  Physiocrats,  Smith 
and  Say,  and  with  Malthus  and  Ricardo,  the  two  writers  whose 
gloomy  forebodings  were  to  cloud  the  glory  of  the  "  natural  order." 

The  second  epoch  covers  the  first  half  of  the  nineteenth  century. 
The  "  adversaries "  include  all  those  writers  who  either  challenged 
or  in  some  way  disputed  the  principles  which  had  been  laid  down 
by  their  predecessors.  To  these  writers  five  chapters  are  devoted, 
dealing  respectively  with  Sismondi,  Saint-Simon,  the  Associative 
Socialists,  List,  and  Proudhon. 


PREFACE  xv 

A  third  epoch  deals  with  the  middle  of  the  nineteenth  century 
and  the  triumph  of  the  Liberal  school,  which  had  hitherto  with- 
stood every  attack,  though  not  without  making  some  concessions. 
It  so  happened  that  the  fundamental  doctrines  of  this  school  were 
definitely  formulated  about  the  same  time,  though  in  a  very  different 
fashion,  of  course,  in  the  Principles  of  Stuart  Mill  in  England  and 
the  Harmonies  of  Bastiat  in  France. 

The  second  half  of  the  nineteenth  century  constitutes  a  fourth 
period.  Those  who  dissented  from  the  Liberalism  of  the  previous 
epoch  are  responsible  for  the  schisms  that  began  to  manifest  them- 
selves in  four  different  directions  at  this  time.  The  Historical 
school  advocates  the  employment  of  the  inductive  method,  and 
the  State  Socialists  press  the  claims  of  a  new  social  policy.  Marxism 
is  an  attack  upon  the  scientific  basis  of  the  science,  and  Christian 
Socialism  a  challenge  to  its  ethical  implications. 

A  fifth  epoch  comprises  the  end  of  the  nineteenth  century  and 
the  beginning  of  the  twentieth.  The  heading  "  Recent  Doctrines  " 
includes  several  theories  that  are  already  well  known  to  us,  but 
which  seem  transfigured — or  disfigured,  as  some  would  prefer  to  put 
it — in  their  new  surroundings.  The  Hedonistic  doctrine  and  the 
theory  of  rent  represent  a  kind  of  revision  of  the  Classical  theories. 
Solidarism  is  an  attempt  to  bridge  the  gap  that  exists  between 
individualism  and  socialism,  whilst  Anarchism  can  only  be  described 
as  a  kind  of  impassioned  Liberalism. 

This  order  of  succession  must  not  be  taken  to  imply  that  each 
antecedent  doctrine  has  either  been  eliminated  by  some  subsequent 
doctrine  or  else  incorporated  in  it.  The  rise  of  the  Historical 
school  in  the  middle  of  the  nineteenth  century,  for  example,  happened' 
to  be  contemporaneous  with  the  triumph  of  the  Liberal  school  and 
the  revival  of  Optimism.  In  a  similar  fashion  the  new  Liberalism 
of  the  Austrian  school  was  coincident  with  the  advent  of  State 
intervention  and  the  rise  of  Collectivism. 

We  cannot,  however,  help  noticing  a  certain  rhythmical  sequence 
in  this  evolutionary  process.  Thus  we  find  the  Classical  doctrine, 
as  it  is  called,  outlined  in  the  earliest  draft  of  the  science,  but  dis- 
appearing under  the  stress  of  more  or  less  socialistic  doctrines,  to 
reappear  in  a  new  guise  later  on.  There  is  no  necessity  for  regarding 
this  as  a  mere  ebb  and  flow  such  as  distinguishes  the  fortunes  of 
political  parties  under  a  parliamentary  regime.  Such  alternation  in 
the  history  of  a  doctrine  has  its  explanation  not  so  much  in  the 
character  of  the  doctrine  itself  as  in  the  favour  of  public  opinion, 
which  varies  with  the  fickleness  of  the  winds  of  heaven. 


xvi  PREFACE 

But  doctrines  and  systems  have  a  vitality  of  their  own  which 
is  altogether  independent  of  the  vagaries  of  fashion.  It  were  better 
to  regard  their  history,  like  all  histories  of  ideas,  as  a  kind  of  struggle 
for  existence.  At  one  moment  conflicting  doctrines  seem  to  dwell 
in  harmony  side  by  side,  content  to  divide  the  empire  of  knowledge 
between  them.  Another  moment  witnesses  them  rushing  at  each 
other  with  tumultuous  energy.  It  may  happen  that  in  the  course 
of  the  struggle  some  of  the  doctrines  are  worsted  and  disappear 
altogether.  But  more  often  than  not  their  conflicting  interests  are 
reconciled  and  the  enmity  is  lost  in  the  unity  of  a  higher  synthesis. 
And  so  it  may  happen  that  a  doctrine  which  everybody  thought 
was  quite  dead  may  rise  with  greater  vigour  than  ever. 

The  bibliography  of  the  subject  is  colossal.  In  addition  to  the 
general  histories,  which  are  already  plentiful,  the  chapters  devoted 
to  the  subject  in  every  treatise  on  political  economy,  and  the 
numerous  articles  which  have  appeared  in  various  reviews,  there 
is  scarcely  an  author,  however  obscure,  who  is  not  the  subject 
of  a  biography.  To  have  attempted  to  enumerate  all  these 
works  would  merely  have  meant  increasing  the  bulk  of  the  book 
without  being  able  to  pretend  that  our  list  was  exhaustive.  It 
is  scarcely  necessary  to  add  that  this  meant  that  we  had  to  con- 
fine ourselves  to  the  work  done  by  the  "  heroes "  of  this  volume. 
Their  commentators  and  critics  only  came  in  for  our  attention 
when  Ave  had  to  borrow  either  an  expression  or  an  idea  directly 
from  them  or  when  we  felt  it  necessary  that  the  reader  should 
fill  up  the  gaps  left  by  our  exposition.  This  accounts  for  the 
number  of  names  which  had  to  be  relegated  to  the  foot-notes. 
But  such  deliberate  excision  must  not  prevent  our  recognising  at 
the  outset  the  debt  that  we  owe  to  the  many  writers  who  have 
traversed  the  ground  before  us.  They  have  facilitated  our  task 
and  have  a  perfect  right  to  regard  themselves  as  our  collaborators. 
We  feel  certain  that  they  will  find  that  their  labours  have  not  been 
ignored  or  forgotten. 

Although  this  book,  so  far  as  the  general  task  of  preparation 
and  revision  is  concerned,  must  be  regarded  as  the  result  of  a 
collective  effort  on  the  part  of  the  two  authors  whose  names  are 
subjoined,  the  actual  work  of  composition  was  undertaken  by  each 
writer  separately.  The  Contents  will  sufficiently  indicate  the  nature 
of  this  division  of  labour. 

The  authors  refuse  to  believe  that  collaboration  in  the  pro- 
duction of  a  scientific  history  of  ideas  need  imply  absolute  agree- 
ment on  every  question  that  comes  up  for  consideration.  Especially 


PREFACE  xvii 

is  this  the  case  with  the  doctrines  of  political  and  social  economy 
outlined  herein ;  each  of  the  authors  has  retained  the  fullest  right 
of  independent  judgment  on  all  these  matters.  Consequently  any 
undue  reserve  or  any  extravagant  enthusiasm  shown  for  some  of 
these  doctrines  must  be  taken  as  an  expression  of  the  personal 
predilection  of  the  signatory  of  the  particular  article. 

CHARLES  GIDE 
CHARLES  RIST 


E.D 


CONTENTS 


BOOK  I:   THE  FOUNDERS 

PAQI 

CHAPTER  I :    THE  PHYSIOCRATS  (M.  GIDE)  1 

I 

L  THE  NATURAL  OKDJEB  5 

IE.  THE  NET  PRODUCT  12 

HI.  THE  CIRCULATION  OF  WEALTH  18 

n 

I.  TRADE  27 

II.  THE  FUNCTIONS  or  THE  STATE  33 

III.  TAXATION  38 

IV.  RESUME  OF  THE  PHY8IOCRATIO  DOCTRINE.      CRITICS  AND  DlSSENTERS  45 


CHAPTER  H  :    ADAM  SMITH  (M.  RIST)  60 

L  DIVISION  OF  LABOUR  56 

n.  THE  "  NATURALISM  "  AND  "  OPTIMISM  "  OF  SMITH  68 

HI.  ECONOMIO  LIBERTY  AND  INTERNATIONAL  TRADE  93 

IV.  THE  INFLUENCE  OF  SMITH'S  THOUGHT  AND  ITS  DIFFUSION.  J.  B. 

SAT  102 


CHAPTER  III :    THE  PESSIMISTS  (M.  GIDE)  118 

L  MALTHUS  120 

THE  LAW  OF  POFULATIOH  121 

EL  RICARDO  138 

1.  THE  LAW  OF  RENT  141 

2.  OF  WAGES  AND  PROFITS  157 

3.  THE  BALANCE  OF  TRADE  THEORY  AND  THE  QUANTITY  THEORY 

OF  MONEY  163 

4.  PAPER  MONEY,  m  ISSTTE  AND  REGULATION  165 

XII 


xx  CONTENTS 


BOOK  II :  THE  ANTAGONISTS 

CHAPTER  I  :    SISMONDI  AND  THE  ORIGINS  OF  THE 
CRITICAL  SCHOOL  (M.  RIST) 

L  THE  AIM  AND  METHOD  OF  POLITICAL  ECONOMY 
II.  SISMONDI'S  CBITICISM  OF  OVER-PRODUCTION  AND  COMPETITION 

III.  THE  DIVORCE  OF  LAND  FROM  LABOUB  AS  THE  CAUSE  OF  PAUPERISM 

AND  OF  CRISES 

IV.  SISMONDI'S  REFORM  PROJECTS.    His  INFLUENCE  UPON  THE  HISTORY 

OF  DOCTRINES 


CHAPTER  II  :    SAINT-SIMON,  THE  SAINT-SIMONIANS, 

AND  THE  BEGINNINGS  OF  COLLECTIVISM  (M.  RIST)  198 

I.  SAINT-SIMON  AND  INDUSTRIALISM  202 

II.  THB  SAINT-SIMONIANS  AND  THEIR  CRITICISM  OF  PRIVATE  PROPERTY  211 

III.  THE  IMPORTANCE  OF  SAINT-SIMONISM  IN  THE  HISTORY  OF  DOCTRINES  225 


CHAPTER  III  :    THE  ASSOCIATIVE  SOCIALISTS 

I.  ROBERT  OWEN  (M.  GIDE) 

1.  THE  CREATION  OF  THE  MILIEU 

2.  THE  ABOLITION  OF  PROFIT 
II.  CHARLES  FOURIER  (M.  GIDE) 

1.  THE  PHALANSTERE 

2.  INTEGRAL  CO-OPERATION 

3.  BACK  TO  THE  LAND 

4.  ATTRACTIVE  LABOUR 

III.  Louis  BLANC  (M.  RIST) 


CHAPTER  IV  :  FRIEDRICH  LIST  AND  THE  NATIONAL 

SYSTEM  OF  POLITICAL  ECONOMY  (M.  RIST)  264 

I.  LIST'S  IDEAS  IN  RELATION  TO  THE  ECONOMIC  CONDITIONS  IN  GERMANY  266 
II.  SOURCES  OF  LIST'S  INSPIRATION.    His  INFLUENCE  UPON  SUBSEQUENT 

PROTECTIONIST  DOCTRINES  277 

III.  LIST'S  REAL  OMQINALITY  287 


CONTENTS  xxi 

PAGB 

'  CHAPTER  V  :    PROUDHON  AND  THE  SOCIALISM  OF 

1848  (M.  RiST)  290 

L  CRITICISM  OP  PEIVATU  PROPERTY  AND  SOCIALISM  291 

II.  THB  REVOLUTION  or  1848  AND  THB  DISCREDIT  or  SOCIALISM  300 

III.  THB  EXCHANGE  BANK  THEORY  307 

IV.  PROUDHOJJ '«  IKFLUJBNC.E  ATTEB  1848  320 


BOOK  III:   LIBERALISM 


CHAPTER  I :   THE  OPTIMISTS  (M.  GIDE)  322 

I.  THB  THEORY  or  SERVICE- VALUE  332 

II.  THE  LAW  or  FREE  UTILITY  AND  RENT  335 

III.  THE  RELATION  OF  PROFITS  TO  WAGES  340 

IV.  THE  SUBORDINATION  OF  PRODUCER  TO  CONSUMES  342 
V.  THE  LAW  OF  SOLIDARITT  844 


CHAPTER  II  :    THE  APOGEE  AND  DECLINE  OF  THE 
CLASSICAL    SCHOOL.    JOHN    STUART    MILL    (M. 

GIDE)  34S 

L  THE  FUNDAMENTAL  LAWS  354 

n.  MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME  366 

LTL  MILL'S  SUCCESSORS  274 


BOOK  IV :  THE  DISSENTERS 

CHAPTER  I :    THE  HISTORICAL  SCHOOL  AND  THE 

CONFLICT  OF  METHODS  (M.  RIST)  878 

I.  THB  ORIGIN  AND  DEVELOPMENT  OF  THE  HISTORICAL  SCHOOL  381 

II.  THE  CRITICAL  IDEAS  OF  THE  HISTORICAL  SCHOOL  388 

III.  THE  POSITIVB  IDEAS  OF  THB  HISTORICAL  SCHOOL  398 


rxii  CONTENTS 


CHAPTER  II  :    STATE  SOCIALISM  (M.  RIST)  407 

L  THE  ECONOMISTS'  CRITICISM  OF  LAISSEZ-FAIRE  410 

IL  THE  SOCIALISTIC  ORIGIN  OP  STATE  SOCIALISM.  RODBERTUS  AND 

LASS  ALLS  414 

1.  RODBEBTTTS  415 

2.  LASSALLB  432 
in.  STATB  SOCIALISM  —  PROPERLY,  so  CALLED  436 


CHAPTER  III :    MARXISM  (M.  GIDE)  449 

L  KABL  MARX  449 

1.  SURPLUS  LABOUR  AND  SURPLUS  VALUE  460 

2.  THE  LAW  OF  CONCENTRATION  OR  APPROPRIATION  469 
II.  TOT  MARXIAN  SCHOOL  466 

III.  THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS  473 

1.  THE  NEO -MARXIAN  REFORMISTS  473 

2.  THE  NEO-MARXIAN  SYNDICALISTS  479 


CHAPTER  IV:    DOCTRINES  THAT  OWE  THEIR  IN- 
SPIRATION TO  CHRISTIANITY  (M.  GIDE)  483 

L  LE  PLAT'S  SCHOOL  486 

II.  SOCIAL  CATHOLICISM  496 

III.  SOCIAL  PROTESTANTISM  503 

IV.  THE  MYSTICS  510 


BOOK  V :   RECENT  DOCTRINES 

CHAPTER  I  :    THE  HEDONISTS  (M.  GIDE)  517 

1.  THE  PSEUDO-RENAISSANCE  OF  THH  CLASSICAL  SCHOOL  517 

II.  THE  PSYCHOLOGICAL  SCHOOL  621 

III.  THE  MATHEMATICAL  SCHOOL  528 

IV.  CRITICISM  OF  THE  HEDONISTIC  DOCTRINES  537 


CONTENTS  xxiii 

PAOB 

CHAPTER  II  :    THE   THEORY   OF  RENT  AND   ITS 

APPLICATIONS  (M.  RIST)  645 

I.  THE  THEORETICAL  EXTENSION  OF  THE  CONCEPT  RENT  646 
IL  UNEARNED  INCREMENT  AND  THE  PROPOSAL  TO  CONFISCATE  RENT 

BY  MEANS  or  TAXATION  668 

EEL  SYSTEMS  or  LAND  NATIONALISATION  670 

IV.  SOCIALIST  EXTENSIONS  OF  THE  DOCTRINE  OF  RENT  679 


CHAPTER  III  :   THE  SOLIDARISTS  (M.  GIDE)  687 

I.  THE  CAUSES  OF  THE  DEVELOPMENT  or  SOLIDARISM 
It.  THE  SOLIDARIST  THESIS 

HL  THE  PRACTICAL  APPLICATION  OF  SOLJDABIST  DOCTRINES 
IV.  CRITICISM 


CHAPTER  IV  :   THE  ANARCHISTS  (M.  RIST)  614 

I.  STIRNER'S    PHILOSOPHICAL  ANARCHISM   AND    THE   CULT   OF  THE 

INDIVIDUAL  616 

EL  SOCIAL  AND  POLITICAL  ANARCHISM  AND  THE  CRITICISM  OF  AUTHORITY  619 

HI.  MUTUAL  AID  AND  THE  ANARCHIST  CONCEPTION  OF  SOCIETY  629 

IV.  REVOLUTION  637 


CONCLUSION  (MM.  GIDE  AND  RIST)  643 

INDEX  649 


BOOK  I :   THE  FOUNDERS 


CHAPTER  I:  THE  PHYSIOCRATS 

POLITICAL  ECONOMY  as  the  name  of  a  special  science  is  the  invention 
of  one  Antoine  de  Montchr£tien,  who  first  employed  the  term  about 
the  beginning  of  the  seventeenth  century.  Not  until  the  middle  of  the 
eighteenth  century,  however,  does  the  connotation  of  the  word  in 
any  way  approach  to  modern  usage.  A  perusal  of  the  article  on 
Political  Economy  which  appeared  in  the  Grande  Encyclopedic  of 
1755  will  help  us  to  appreciate  the  difference.  That  article  was 
contributed  by  no  less  a  person  than  Jean  Jacques  Rousseau,  but 
its  medley  of  politics  and  economics  seems  utterly  strange  to  us. 
Nowadays  it  is  customary  to  regard  the  adjective  "  political  "  as 
unnecessary,  and  an  attempt  is  made  to  dispense  with  it  by  employing 
the  terms  "economic  science"  or  "social  economics,"  but  this  article 
clearly  proves  that  it  was  not  always  devoid  of  significance.  It  also 
reveals  the  interesting  fact  that  the  science  has  always  been  chiefly 
concerned  with  the  business  side  of  the  State,  especially  with 
the  material  welfare  of  the  citizens — "  with  the  fowl  in  the  pot," 
as  Henry  IV  put  it.  Even  Smith  never  succeeded  in  getting  quite 
beyond  this  point  of  view,  for  he  declares  that  "  the  object  of  the 
political  economy  of  every  nation  is  to  increase  the  riches  and  the 
power  of  that  country."  1 

But  the  counsels  given  and  the  recipes  offered  for  attaining 
the  desired  end  were  as  diverse  as  they  were  uncertain.  One  school, 
known  as  the  Mercantilist,  believed  that  a  State,  like  an  individual, 
must  secure  the  maximum  of  silver  and  gold  before  it  could  become 
wealthy.  Happy  indeed  was  a  country  like  Spain  that  Jiad  dis- 
covered a  Peru,  or  Holland,  which,  in  default  of  mines,  could  procure 
gold  from  the  foreigner  in  exchange  for  its  spices.  Foreign  trade 
really  seemed  a  quite  inexhaustible  mine.  Other  writers,  who  were 
socialists  in  fact  though  not  in  name — for  that  term  is  of  later  inven- 
tion— thought  that  happiness  could  only  be  found  in  a  more  equal 
distribution  of  wealth,  in  the  abolition  or  limitation  of  the  rights  of 
private  property,  or  in  the  creation  of  a  new  society  on  the  basis 
of  a  new  social  contract — in  short,  in  the  foundation  of  the  Utopian 
commonwealth. 

1  Wealth  of  Nation*,  vol.  i,  p.  351. 
E.D.  1  A' 


2  THE  PHYSIOCRATS 

It  was  at  this  juncture  that  Quesnay  appeared.  Quesnay  wai 
a  doctor  by  profession,  who  now,  when  on  the  verge  of  old  age,  had 
turned  his  attention  to  the  study  of  "  rural  economy  " — the  problem 
of  the  land  and  the  means  of  subsistence.1  Boldly  declaring  that 
the  solution  of  the  problem  had  always  lain  ready  to  hand,  needing 
neither  inventing  nor  discovering,  he  further  maintained  that  all 
social  relations  into  which  men  enter,  far  from  being  haphazard, 
are,  on  the  contrary,  admirably  regulated  and  controlled.  To  those 
who  took  the  trouble  to  think,  the  laws  governing  human  asso- 
ciations seemed  almost  self-evident,  and  the  difficulties  they  involved 
no  greater  than  the  difficulties  presented  by  the  laws  of  geometry. 
So  admirable  were  these  laws  in  every  respect  that  once  they 
were  thoroughly  known  they  were  certain  to  command  allegiance. 
Dupont  de  Nemours  cannot  be  said  to  have  exaggerated  when,  in 
referring  to  this  doctrine,  he  spoke  of  it  as  "  very  novel  indeed."  f 

It  is  not  too  much  to  say  that  this  marks  the  beginning  of  a  new 
science — the  science  of  Political  Economy.  The  age  of  forerunners 
is  past.  Quesnay  and  his  disciples  must  be  considered  the  real 
founders  of  the  science.  It  is  true  that  their  direct  descendants, 
the  French  economists,  very  inconsiderately  allowed  the  title  to 
pass  to  Adam  Smith,  but  foreign  economists  have  again  restored 
it  to  France,  to  remain  in  all  probability  definitely  hers.  But,  as  is 
the  case  with  most  sciences,  there  is  not  very  much  to  mark  the  date  of 
its  birth  or  to  determine  the  stock  from  which  it  sprang ;  all  that 
we  can  confidently  say  is  that  the  Physiocrats  were  certainly  the  first 
to  grasp  the  conception  of  a  unified  science  of  society.  In  other  words, 
they  were  the  first  to  realise  that  all  social  facts  are  linked  together  in 
the  bonds  of  inevitable  laws,  which  individuals  and  Governments 
would  obey  if  they  were  once  made  known  to  them.  It  may,  of  course, 
be  pointed  out  that  such  a  providential  conception  of  economic  laws 
has  little  in  common  with  the  ordinary  naturalistic  or  deterministic 
standpoint  of  the  science,  and  that  several  of  the  generalisations  are 
simply  the  product  of  their  own  imaginations.  It  must  also  be  ad- 
mitted that  Smith  had  far  greater  powers  of  observation,  as  well  as  a 
superior  gift  of  lucid  exposition,  and  altogether  made  a  more  notable 
contribution  to  the  science.  Still,  it  was  the  Physiocrats  who  con- 
structed the  way  along  which  Smith  and  the  writers  of  the  hundred 

1  Quesnay*8  first  economic  articles,  written  for  the  Grande  Encyclopldie,  were 
on  Let  Grains  and  Let  Fermiers. 

1  Professor  Hector  Denis,  speaking  of  the  Physiocratio  doctrine,  remarks 
that  its  imperfections  are  easily  demonstrated,  bat  that  we  seldom  recognise  its 
incomparable  greatness. 


THE  PHYSIOCRATS  8 

years  which  follow  have  all  marched.  Moreover,  we  know  that  but  for 
the  death  of  Quesnay  in  1774 — two  years  before  the  publication  of 
the  Wealth  of  Nations — Smith  would  have  dedicated  his  master- 
piece to  him. 

The  Physiocrats  must  also  be  credited  with  the  foundation  of 
the  earliest  "  school "  of  economists  in  the  fullest  sense  of  the 
term.  The  entrance  of  this  small  group  of  men  into  the  arena  of 
history  is  a  most  touching  and  significant  spectacle.  So  complete 
was  the  unanimity  of  doctrine  among  them  that  their  very  names 
and  even  their  personal  characteristics  are  for  ever  enshrouded  by 
the  anonymity  of  a  collective  name.1 

Their  publications  follow  each  other  pretty  closely  for  a  period 
of  twenty  years,  from  1756  to  1778. 2 

1  "  The  genuine  economists  are  easily  depicted.  In  Dr.  Quesnay  they 
have  a  common  master ;  a  common  doctrine  in  the  Philosophic  rurale  and  the 
Analyse  iconomique.  Their  classical  literature  is  summed  up  in  the  generic 
term  Physiocracy.  In  the  Tableau  iconomique  they  possess  a  formula  with 
technical  terms  as  precise  as  old  Chinese  characters."  This  definition  of  the 
Physiocrats,  given  by  one  of  themselves,  the  Abbe"  Baudeau  (Ephimiridea,  April 
1776) — writing,  we  may  be  sure,  in  no  malicious  spirit — shows  us  that  the  school 
possessed  not  a  little  of  the  dogmatism  of  the  Chinee. 

1  The  first  not  only  in  chronological  order  but  the  chief  recognised  by  all 
was  Dr.  Quesnay  (1694-1774),  the  physician  of  Louis  XV  and  of  Mme.  de 
Pompadour.  He  had  already  published  numerous  works  on  medicine,  especially 
the  Essai  physique  sur  VEconomie  animate.  (1736)  before  turning  his  attention  to 
economic  questions,  and  more  especially  to  problems  of  '  rural  economy."  His 
first  contributions,  the  essays  on  Let  drains  and  Les  Fermiera.  which  appeared 
in  the  Grande  Encydopedie  in  1756  and  1757,  were  followed  by  his  famous  Tableau 
ieonomique  in  1758,  when  he  was  sixty -four  years  of  age,  and  in  1760  by  his 
Maximes  generates  du  Gouvemement  iconomique  eFun  Royaume  agricole,  which  is 
merely  a  development  of  the  preceding  work. 

His  writings  were  not  numerous,  but  his  influence,  like  that  of  Socrates, 
disseminated  as  it  was  by  bis  disciples,  became  very  considerable. 

The  best  edition  of  his  works  is  that  published  by  Professor  Oncken  of  Berne, 
(Euvres  economiques  et  philosophiquea  de  F.  Quesnay  (Paris  and  Frankfort,  1888). 
Our  quotations  from  the  founders  are  taken  from  Collections  des  Principaux 
Economistes,  published  by  Daire. 

The  Marquis  de  Mirabeau,  father  of  the  great  orator  of  the  Revolution,  a 
man  of  a  fiery  temperament  like  his  son,  published  at  about  the  same  date  as  the 
production  of  the  Tableau  his  L'Ami  des  Hommes.  This  book,  which  created  a 
great  sensation,  does  not  strictly  belong  to  Physiocratic  literature,  for  it  ignores 
the  fundamental  doctrine  of  the  school.  La  Thiorie  de  VImp6t  (1760)  and  La 
Philosophic  rurale  (1763),  on  the  other  hand,  owe  their  inspiration  to  Physiocracy. 

Mercier  de  la  Riviere,  a  parliamentary  advocate,  published  L'Ordrc  natural 
et  easentiel  des  Sociitia  politiques  in  1767.  Dupont  de  Nemours  refers  to  this  as 
a  "sublime  work,"  and  though  it  does  not,  perhaps,  deserve  that  epithet  it 
contains,  nevertheless,  the  code  of  the  Physiocratio  doctrine. 

Dupont  de  Nemours,  as  he  is  called  after  his  native  town   published  about 


4  THE  PHYSIOCRATS 

Turgot  was  the  only  literary  person  among  them,  but  like  his 
confreres  he  was  devoid  of  wit,  though  the  age  was  noted  for 
its  humorists.  On  the  whole  they  were  a  sad  and  solemn  sect, 
and  their  curious  habit  of  insisting  upon  logical  consistency — as 

the  same  time,  1768,  when  he  was  only  twenty-nine,  a  book  entitled  Physiocratie, 
on  Constitution  essentiette  du  Gouvernement  U  plus  avantageux  au  Genre  humain. 
To  him  we  owe  the  term  from  which  the  school  took  its  name — Physiocracy, 
which  signifies  "  the  rule  of  nature."  But  the  designation  "  Physiocrats  "  was 
unfortunate  and  was  almost  immediately  abandoned  for  "  Economistes." 
Quesnay  and  his  disciples  were  the  first  "  Economistes."  It  was  only  much 
later,  when  the  name  "  Economist "  became  generic  and  useless  as  a  distinc- 
tive mark  for  a  special  school,  that  writers  made  a  practice  of  reverting  to  the 
older  term  "  Physiocrat." 

An  enthusiastic  disciple  of  Quesnay,  Dupont's  rSle  was  chiefly  that  of  a 
propagandist  of  Physiocratic  doctrines,  and  he  made  little  original  contribution 
to  the  science.  At  an  early  date,  moreover,  the  great  political  events  in  which 
he  took  an  active  part  proved  a  distraction.  He  survived  all  his  colleagues, 
and  was  the  only  one  of  them  who  lived  long  enough  to  witness  the  Revolution,  in 
which  he  played  a  prominent  part.  He  successively  became  a  deputy  in  the  Tiers 
Etat,  a  president  of  the  Constituent  Assembly,  and  later  on,  under  the  Directoire, 
President  du  Conseil  des  Anciens.  He  even  assisted  in  the  restoration  of  the 
Empire,  and  political  economy  was  first  honoured  at  the  hands  of  the  Institut 
when  he  became  a  member  of  that  body. 

In  1777  Le  Trosne,  an  advocate  at  the  Court  of  Orleans,  published  a  book 
entitled  De  I'Interet  social,  par  rapport  a  la  Valuer,  a  la  Circulation,  a  V Industrie 
et  au  Commerce,  which  is  perhaps  the  best  or  at  least  the  most  strictly  economic 
of  all.  Mention  must  also  be  made  of  the  Abbe  Baudeau,  who  has  no  less  than 
eighty  volumes  to  his  credit,  chiefly  dealing  with  the  corn  trade,  but  whose 
principal  work  is  L1  Introduction  a  la  Philosophic  iconomique  (1771) ;  and  of  the 
Abb6  Roubaud,  afterwards  Margrave  of  Baden,  who  had  the  advantage  of 
oeing  not  merely  a  writer  but  a  prince,  and  who  carried  out  some  Physiocratic 
experiments  in  some  of  the  villages  of  his  small  principality. 

We  have  not  yet  mentioned  the  most  illustrious  member  of  the  school,  both 
in  respect  of  his  talent  and  his  position,  namely,  Turgot  (1727-81).  His  name  is 
generally  coupled  with  that  of  the  Physiocrats,  and  this  classification  is  sufficiently 
justified  by  the  similarity  of  their  ideas.  Still,  as  we  shall  see,  in  many  respects 
he  stands  by  himself,  and  bears  a  close  resemblance  to  Adam  Smith.  Moreover, 
he  commenced  writing  before  the  Physiocrats.  His  essay  on  paper  money  dates 
from  1748,  when  he  was  only  twenty -one  years  of  age,  but  his  most  important 
work,  Reflexions  sur  la  Formation  et  la  Distribution  des  Richesses,  belongs  to  1766. 
As  the  Intendant  of  Limoges  and  again  as  a  minister  of  Louis  XVI  he  possessed 
the  necessary  authority  to  enable  him  to  realise  his  ideas  of  economic  liberty, 
which  he  did  by  his  famous  edicts  abolishing  taxes  upon  corn  passing  from  one 
province  to  another,  and  by  the  abolition  of  the  rights  of  wardenship  and  privilege. 

Unlike  the  other  Physiocrats,  who  swore  only  by  Dr.  Quesnay,  Turgot  owed  a 
great  deal  to  a  prominent  business  man,  Vincent  de  Gournay,  who  at  a  later 
date  became  the  Intendant  of  Commerce.  Gournay  died  in  1759,  at  the  early  age 
of  forty -seven.  Of  Gournay  we  know  next  to  nothing  beyond  what  Turgot  says 
of  him  in  his  eulogy  (See  Schelle,  Vincent  de  Gournay,  1897). 

Bibliography.     Books  dealing  with  the  Physiocratic  system,  both  in  French 


THE  NATURAL  ORDER  5 

if  they  were  the  sole  depositaries  of  eternal  truth — must  often 
have  been  very  tiresome.  They  soon  fell  an  easy  prey  to  the 
caustic  sarcasm  of  Voltaire.1  But  despite  all  this  they  enjoyed 
a  great  reputation  among  their  more  eminent  contemporaries. 
Statesmen,  ambassadors,  and  a  whole  galaxy  of  royal  personages, 
including  the  Margrave  of  Baden,  who  attempted  to  apply  their 
doctrines  in  his  own  realm,  the  Grand  Duke  Leopold  of  Tuscany, 
the  Emperor  Joseph  II  of  Austria,  Catherine,  the  famous  Empress 
of  Russia,  Stanislaus,  King  of  Poland,  and  Gustavus  III  of  Sweden, 
were  numbered  among  their  auditors.  Lastly,  and  most  un- 
expectedly of  all,  they  were  well  received  by  the  Court  ladies  at 
Versailles.  In  a  word,  Physiocracy  became  the  rage.  All  this  may 
seem  strange  to  us,  but  there  are  several  considerations  which  may 
well  be  kept  in  view.  The  society  of  the  period,  raffint  and  licentious 
as  it  was,  took  the  same  delight  in  the  "rural  economy  "  of  the  Phy- 
siocrats as  it  did  in  the  pastorals  of  Trianon  or  Watteau.  Perhaps  it 
gleaned  some  comfort  from  the  thought  of  an  unchangeable  "  natural 
order,"  just  when  the  political  and  social  edifice  was  giving  way 
beneath  its  feet.  It  may  be  that  its  curiosity  was  roused  by  that 
terse  saying  which  Quesnay  wrote  at  the  head  of  the  Tableau 
economique :  "  Pauvres  paysans,  pauvre  royaume !  Pauvre  royaume, 
pauvre  roi ! "  or  that  it  felt  in  those  words  the  sough  of  a  new  breeze, 
not  very  threatening  as  yet,  but  a  forerunner  of  the  coming  storm. 

An  examination  of  the  doctrine,  or  the  essential  principles  as  they 
called  them,  must  precede  a  consideration  of  the  system  or  the  pro- 
posed application  of  those  principles. 


I :   THE  NATURAL  ORDER 

THE  essence  of  the  Physiocratic  system  lay  in  their  conception  of 
the  "  natural  order."  L'Ordre  naturel  et  essential  des  Societes  politiques 
is  the  title  of  Mercier  de  la  Riviere's  book,  and  Dupont  de  Nemours 
defined  Physiocracy  as  "  the  science  of  the  natural  order." 

What  are  we  to  understand  by  these  terms  ? 

It  is  hardly  necessary  to  say  that  the  term  **  natural  order  "  is 
meant  to  emphasise  the  contrast  between  it  and  the  artificial  social 
and  other  languages,  are  fairly  numerous.  A  very  detailed  account  of  these 
may  be  found  in  M.  Weulersse's  work,  Le  Mouvement  phyaiocratique  en  France  de 
1756  a  1770,  published  in  1910,  which  also  contains  a  very  complete  exposition 
of  the  Physiocratic  doctrine.  In  English  there  is  a  succinct  account  of  the  system 
inHiggs'  Physiocrats  (1897). 

1  Especially  in  the  celebrated  pamphlet,  L'Homme  aux  Quarante  Ecus. 


6  THE  PHYSIOCRATS 

order  voluntarily  created  upon  the  basis  of  a  social  contract.1  But  a 
purely  negative  definition  is  open  to  many  different  interpretations. 

In  the  first  place,  this  "  natural  order  "  may  be  conceived  as  a 
state  of  nature  in  opposition  to  a  civilised  state  regarded  as  an 
artificial  creation.  To  discover  what  such  a  "  natural  order  "  really 
was  like  man  must  have  recourse  to  his  origins. 

Quotations  from  the  Physiocrats  in  support  of  this  view  might 
easily  be  cited.2  This  interpretation  has  the  further  distinction  of 

1  J.  J.  Rousseau,  the  author  of  the  Contrat  Social  (1762),  was  a  con- 
temporary of  the  Physiocrats,  but  he  never  became  a  member  of  the  school. 
Mirabeau's  attempt  to  win  his  allegiance  proved  a  failure.  The  "  natural 
order  "  and  the  "  social  contract  "  seem  incompatible,  for  the  natural  and  spon- 
taneous can  never  be  the  subject  of  contract.  One  might  even  be  tempted  to  think 
that  Rousseau's  celebrated  theory  was  formulated  in  opposition  to  Physiocracy, 
unless  we  remembered  that  the  social  contract  theory  is  much  older  than 
Rousseau's  work.  Traces  of  the  same  idea  may  be  found  in  many  writings, 
especially  those  inspired  by  Calvinism.  To  Rousseau  the  social  question 
seemed  to  be  a  kind  of  mathematical  problem,  and  any  proposed  solution  must 
satisfy  certain  complicated  conditions,  which  are  formulated  thus  :  "  To  find  a 
form  of  association  which  protects  with  the  whole  common  force  the  person  and 
property  of  each  associate,  and  in  virtue  of  which  everyone,  while  uniting  himself 
to  all,  obeys  only  himself  and  remains  as  free  as  before."  Nothing  could  well  be 
further  from  the  Physiocratic  view.  Their  belief  was  that  there  was  nothing  to 
find  and  nothing  to  create.  The  "  natural  order  "  was  self-evident. 

It  is  true  that  Rousseau  was  an  equally  enthusiastic  believer  in  a  natural 
order,  in  the  voice  of  nature,  and  in  the  native  kindness  of  mankind.  "  The 
eternal  laws  of  nature  and  order  have  a  real  existence.  For  the  wise  they  serve 
as  positive  laws,  and  they  are  engraved  on  the  innermost  tablets  of  the  heart 
by  both  conscience  and  reason."  (Smile,  Book  V.)  The  language  is  identical 
with  that  of  the  Physiocrats.  But  there  is  this  great  difference.  Rousseau 
thought  that  the  state  of  nature  had  been  denaturalised  by  social  and  especially 
by  political  institutions,  including,  of  course,  private  property ;  and  his  chief 
desire  was  to  give  back  to  the  people  the  equivalent  of  what  they  had  lost. 
The  "  social  contract "  is  just  an  attempt  to  secure  this.  The  Physiocrats,  on  the 
other  hand,  regarded  the  institution  of  private  property  as  the  perfect  bloom  of 
the  "  natural  order."  Its  beauty  has  perhaps  suffered  at  the  hands  of  turbulent 
Governments,  but  let  Governments  be  removed  and  the  "  natural  order  "  will  at 
once  resume  its  usual  course. 

There  is  also  this  other  prime  difference.  The  Physiocrats  regarded  interest 
and  duty  as  one  and  the  same  thing,  for  by  following  his  own  interest  the  individual 
is  also  furthering  the  good  of  everybody  else.  To  Rousseau  they  seemed  antago- 
nistic :  the  former  must  be  overcome  by  the  latter.  "  Personal  interest  is  always 
in  inverse  ratio  to  duty,  and  becomes  greater  the  narrower  the  association,  and 
the  less  sacred."  (Contrat  Social,  ii,  chap.  3.)  In  other  words,  family  ties  and 
co-operative  associations  are  stronger  than  patriotism. 

*  "  There  is  a  natural  society  whose  existence  is  prior  to  every  other  human 
association.  .  .  .  These  self-evident  principles,  which  might  form  the  founda- 
tion of  a  perfect  constitution,  are  also  self -revealing.  They  are  evident  not  only  to 
the  well-informed  student,  but  also  to  the  simple  savage  as  he  issues  from  the  lap 


THE  NATURAL  ORDER  7 

being  in  accord  with  the  spirit  of  the  age.  The  worship  of  the 
"  noble  savage  "  was  a  feature  of  the  end  of  the  eighteenth  century. 
It  pervades  the  literature  of  the  period,  and  the  cult  which  began  with 
the  tales  of  Voltaire,  Diderot,  and  Marmontel  reappears  in  the 
anarchist  writers  of  to-day.  As  an  interpretation  of  the  Physiocratic 
position,  however,  it  must  be  unhesitatingly  rejected,  for  no  one  bore 
less  resemblance  to  a  savage  than  a  Physiocrat.  They  all  of  them 
lived  highly  respectable  lives  as  magistrates,  intendants.  priests,  and 
royal  physicians,  and  were  completely  captivated  by  ideas  of  orderli- 
ness, authority,  sovereignty,  and  property — none  of  them  conceptions 
compatible  with  a  savage  state.  "  Property,  security,  and  liberty 
constitutes  the  whole  of  the  social  order."  1  They  never  acquiesced 
in  the  view  that  mankind  suffered  loss  in  passing  from  the  state 
of  nature  into  the  social  state ;  neither  did  they  hold  to  Rousseau's 
belief  that  there  was  greater  freedom  in  the  natural  state,  although  its 
dangers  were  such  that  men  were  willing  to  sacrifice  something  in 
order  to  be  rid  of  them,  but  that  nevertheless  in  entering  upon  the  new 
state  something  had  been  lost  which  could  never  be  recovered.*  All 
this  was  a  mere  illusion  in  the  opinion  of  the  Physiocrats.  Nothing 
was  lost,  everything  was  to  be  gained,  by  passing  from  a  state  of  nature 
into  the  civilised  state. 

In  the  second  place,  the  term  "  natural  order  "  might  be  taken 
to  mean  that  human  societies  are  subject  to  natural  laws  such  as 
govern  the  physical  world  or  exercise  sway  over  animal  or  organic 
life.  From  this  standpoint  the  Physiocrats  must  be  regarded  as  the 
forerunners  of  the  organic  sociologists.  Such  interpretation  seems 
highly  probable  because  Dr.  Quesnay  through  his  study  of  "  animal 
economy  "  (the  title  of  one  of  his  works)  and  the  circulation  of  the 

of  nature."  (Dupont,  vol.  i,  p.  341.)  Some  Physiocrats  even  seem  inclined  to  the 
belief  that  this  "  natural  order  "  has  actually  existed  in  the  past  and  that  men  lost 
it  through  their  own  remissness.  Dupont  de  Nemours  mournfully  asks  :  "  How 
have  the  people  fallen  from  that  state  of  felicity  in  which  they  lived  in  those 
far  off ,  happy  days  ?  How  is  it  that  they  failed  to  appreciate  the  natural  order  ?  " 
But  even  when  interpreted  in  this  fashion  it  had  no  resemblance  to  a  savage 
state.  It  must  rather  be  identified  with  the  Golden  Age  of  the  ancients  or  the 
Eden  of  Holy  Scripture.  It  is  a  lost  Paradise  which  we  must  seek  to  regain. 

The  view  is  not  peculiar  to  the  Physiocrats,  but  it  is  interesting  to  note  how 
unfamiliar  they  were  with  the  modern  idea  of  evolutionary  progress. 

1  Mercier  de  la  Riviere,  vol;  ii,  p.  615.  "  Natural  right  is  indeterminate  in  a 
state  of  nature  [note  the  paradox].  The  right  only  appears  when  justice  and 
labour  have  been  established."  (Quesnay,  p.  43.) 

1  "  By  entering  society  and  making  conventions  for  their  mutual  advantage 
men  increase  the  scope  of  natural  right  without  incurring  any  restriction  of  theii 
liberties,  for  this  is  just  the  state  of  things  that  enlightened  reason  would  have 
chosen."  (Quesnay,  pp.  43,  44.) 


8  THE  PHYSIOCRATS 

blood  was  already  familiar  with  these  ideas.  Social  and  animal 
economy,  both,  might  well  have  appeared  to  him  in  much  the  same 
light  as  branches  of  physiology.  From  physiology  to  Physiocracy 
was  not  a  very  great  step.  At  any  rate,  the  Physiocrats  succeeded 
in  giving  prominence  to  the  idea  of  the  interdependence  of  all  social 
classes  and  of  their  final  dependence  upon  nature.  And  this  we 
might  almost  say  was  a  change  tantamount  to  a  transformation  from 
a  moral  to  a  natural  science.1 

Even  this  explanation  seems  to  us  insufficient.  Dupont,  in  the 
words  which  we  have  quoted  in  the  footnote  below,  seems  to  imply  that 
the  laws  of  the  beehive  and  the  ant-hill  are  imposed  by  common 
consent  and  for  mutual  benefit.  Animal  society,  so  it  seemed 
to  him,  was  founded  upon  social  contract.  But  such  a  conception 
of  "  law  "  is  very  far  removed  from  the  one  usually  adopted  by  the 
natural  sciences,  by  physicians  and  biologists,  say.  And,  as  a  matter 
of  fact,  the  Physiocrats  were  anything  but  determinists.  They 
neither  believed  that  the  "  natural  order  "  imposed  itself  like  gravi- 
tation nor  imagined  that  it  could  ever  be  realised  in  human  society 
as  it  is  in  the  hive  or  the  ant-hill.  They  saw  that  the  latter  were 
well-ordered  communities,  while  human  society  at  its  present  stage 
is  disordered,  because  man  is  free  whereas  the  animal  is  not. 

What  are  we  to  make  of  this  "  natural  order  "  then  ?  The 
"  natural  order,"  so  the  Physiocrats  maintained,  is  the  order  which 
God  has  ordained  for  the  happiness  of  mankind.  It  is  the  provi* 
dential  order.  *  To  understand  it  is  our  first  duty — to  bring  our  lives 
into  conformity  with  it  is  our  next. 

1  Pursuing  this  same  idea,  Dupont  writes  as  follows :  "  It  is  thirteen  years 
since  a  man  of  exceptional  genius,  well  versed  in  profound  disquisition,  and  already 
known  for  his  success  in  an  art  where  complete  mastery  only  comes  with  careful 
observation  and  complete  submission  to  the  laws  of  nature,  predicted  that  natural 
laws  extended  far  beyond  the  bounds  hitherto  assigned  to  them.  If  nature 
gives  to  the  bee,  the  ant,  or  the  beaver  the  power  of  submitting  by  common 
consent  and  for  their  own  interest  to  a  good,  stable,  and  equable  form  of  govern- 
ment, it  can  hardly  refuse  man  the  power  of  raising  himself  to  the  enjoyment  of 
the  same  advantages.  Convinced  of  the  importance  of  this  view,  and  of  the 
important  consequences  that  might  follow  from  it,  he  applied  his  whole  intel- 
lectual strength  to  an  investigation  of  the  physical  laws  which  govern  society." 
Elsewhere  he  adds  :  "  The  natural  order  is  merely  the  physical  constitution  which 
God  Himself  has  given  the  universe."  (Introduction  to  Quesnay's  works,  p.  21.) 

Hector  Denis  in  his  Histoire  des  Doctrines  expresses  the  belief  that  the  most 
characteristic  feature  of  the  Physiocratic  system  is  the  emphasis  laid  upon  a 
naturalistic  conception  of  society.  He  illustrates  this  by  means  of  diagrams 
showing  the  identity  of  the  circulation  of  wealth  and  the  circulation  of  the  blood. 

1  "  Its  laws  are  irrevocable,  pertaining  as  they  do  to  the  essence  of  matter 
»nd  the  soul  of  humanity.  They  are  just  the  expression  of  the  will  of  God.  .  .  . 


THE  NATURAL  ORDER  9 

But  can  a  knowledge  of  the  "  order  "  ever  be  acquired  by  men  ? 
To  this  they  reply  that  the  distinctive  mark  of  this  "  order  "  is  its 
obviousness.  This  word  occurs  on  almost  every  page  they  wrote.1 
Still,  the  self-evident  must  in  some  way  be  apprehended.  The  most 
brilliant  light  can  be  seen  only  by  the  eye.  By  what  organ  can 
this  be  sensed  ?  By  instinct,  by  conscience,  or  by  reason  ?  Will 
a  divine  voice  by  means  of  a  supernatural  revelation  show  us  the 
way  of  truth,  or  will  it  be  Nature's  hand  that  shall  lead  us  in  the 
blessed  path  ?  The  Physiocrats  seem  to  have  ignored  this  question, 
for  every  one  of  them  indifferently  gives  his  own  answer,  regardless 
of  the  fact  that  it  may  contradict  another's.  Mercier  de  la  Riviere 
recalls  the  saying  of  St.  John  concerning  the  "  Light  which  lighteth 
every  man  that  cometh  into  the  world."  This  may  be  taken  to  be 
an  internal  light  set  by  God  in  the  heart  of  every  man  to  enable  him  to 
choose  Ms  path.  Quesnay,  so  Dupont  affirms,  "  must  have  seen 
that  man  had  only  to  examine  himself  to  find  within  him  an  in- 
articulate conception  of  these  laws.  In  other  words,  introspection 
clearly  shows  that  men  are  unwittingly  guided  by  an  *'  inherent  " 
knowledge  of  Physiocracy."  2  But,  after  all,  it  seems  that  this 
intuitive  perception  is  insufficient  to  reveal  the  full  glory  of  the 
order.  For  Quesnay  declared  that  a  knowledge  of  its  laws  must 
be  enforced  upon  -men,  and  this  afforded  a  raison  d'etre  for  an 
educational  system  which  was  to  be  under  the  direct  control  of 
the  Government. 

To  sum  up,  we  may  say  that  the  "  natural  order  "  was  that 
order  which  seemed  obviously  the  best,  not  to  any  individual 
whomsoever,  but  to  rational,  cultured,  liberal-minded  men  like  the 
Physiocrats.  It  was  not  the  product  of  the  observation  of  external 
facts ;  it  was  the  revelation  of  a  principle  within.  And  this  is  one 
reason  why  the  Physiocrats  showed  such  respect  for  property  and 
authority.  It  seemed  to  them  that  these  formed  the  very  basis 
of  the  "  natural  order." 

It  was  just  because  the  "  natural  order  "  was  **  supernatural," 
and  so  raised  above  the  contingencies  of  everyday  life,  that  it 
seemed  to  them  to  be  endowed  with  all  the  grandeur  of  the  geo- 

All  our  interests,  all  our  wishes,  are  focused  at  one  point,  making  for 
harmony  and  universal  happiness.  We  must  regard  this  as  the  work  of  a  kind 
Providence,  which  desires  that  the  earth  should  be  peopled  by  happy  human 
beings."  (Mercier  de  la  Riviere,  vol.  i,  p.  390  ;  vol.  ii,  p.  638.) 

1  "  There  is  a  natural  judge  of  all  ordinances,  even  of  the  sovereign's.  This 
judge,  which  recognises  no  exceptions,  is  just  the  evidence  of  their  conformity  with 
or  opposition  to  natural  laws."  (Dupont,  vol.  i,  p.  746.) 

1  Dupont,  introduction  to  Quesnay'e  works,  vol.  i,  pp.  19  and  2S(, 


10  THE  PHYSIOCRATS 

metrical  order,  with  its  double  attributes  of  universality  and  immu- 
tability. It  remained  the  same  for  all  times,  and  for  all  men.  Its 
fiat  was  "  unique,  eternal,  invariable,  and  universal."  Divine  in  its 
origin,  it  was  universal  in  its  scope,  and  its  praises  were  sung  in 
litanies  that  might  rival  the  Ave  Maria.1  Speaking  of  its  uni- 
versality. Turgot  writes  as  follows  :  "  Whoever  is  unable  to  overlook 
the  accidental  separation  of  political  states  one  from  another,  or 
to  forget  their  diverse  institutions,  will  never  treat  a  question  of 
political  economy  satisfactorily."  *  Referring  to  its  immutability, 
he  adds  :  "  It  is  not  enough  to  know  what  is  or  what  has  been  ;  we 
must  also  know  what  ought  to  be.  The  rights  of  man  are  not 
founded  upon  history  :  they  are  rooted  in  his  nature." 

It  looked  as  if  this  dogmatic  optimism  would  dominate  the  whole 
Classical  school,  especially  the  French  writers,  and  that  natural 
law  would  usurp  the  functions  of  Providence.  To-day  it  is  every- 
where discredited,  but  when  it  first  loomed  above  the  horizon  its 
splendour  dazzled  all  eyes.  Hence  the  many  laudatory  remarks, 
which  to  us  seem  hyperbolical,  if  not  actually  ridiculous.3  But 
it  was  no  small  thing  to  found  a  new  science,  to  set  up  a  new  aim  and 
a  fresh  ideal,  to  lay  down  the  framework  which  others  were  to  fill  in. 

It  was  the  practical  results,  however,  that  revealed  the  full 
powers  of  the  "  natural  order."  It  so  happened  that  the  mass  of 
regulations  which  constituted  the  old  regime  fell  to  the  ground 
before  its  onslaughts  almost  immediately,  and  it  all  came  about  in 
this  fashion. 

Knowledge  of  the  "  natural  order  "  was  not  sufficient.  Daily 
life  must  also  conform  to  the  knowledge.  Nothing  could  be  easier 
than  this,  for  "  if  the  order  really  were  the  most  advantageous  "  4 
every  man  could  be  trusted  to  find  out  for  himself  the  best  way  of 
attaining  it  without  coercion  of  any  kind.6 

This  psychological  balance  which  every  individual  was  supposed 
to  carry  within  himself,  and  which,  as  the  basis  of  the  Neo-Classical 
school,  is  known  as  the  Hedonistic  principle,  is  admirably  described 
by  Quesnay.6  "  To  secure  the  greatest  amount  of  pleasure  with 

1  Baudeau,  vol.  i,  p.  820.  *  Letter  to  Mdlle.  Lespinasse  (1770). 

*  See  some  remarks  on  the  Tableau  economique  on  p.  18. 
4  Baudeau,  Ephemerides  du  Citoyen. 

6  "  The  laws  of  the  natural  order  do  not  in  any  way  restrain  the  liberty  of 
mankind,  for  the  great  advantage  which  they  possess  is  that  they  make  for 
greater  liberty."  (Quesnay,  Droit  Naturel,  p.  55.)  And  Mercier  de  la  Riviere  says 
(vol.  ii,  p.  617):  "The  institution  of  private  property  and  of  liberty  would 
secure  perfect  order  without  the  help  of  any  other  law." 

•  Dialogues  sur  les  Artisans. 


THE  NATURAL  ORDER  11 

the  least  possible  outlay  should  be  the  aim  of  all  economic  effort." 
And  this  was  what  the  "  order  "  aimed  at.  "  When  every  one  does 
this  the  natural  order,  instead  of  being  endangered,  will  be  all  the 
better  assured."  It  is  of  the  very  essence  of  that  order  that  the 
particular  interest  of  the  individual  can  never  be  separated  from  the 
common  interest  of  all,  but  this  happens  only  under  a  free  system. 
*'  The  movements  of  society  are  spontaneous  and  not  artificial,  and 
the  desire  for  joy  which  manifests  itself  in  all  its  activities  unwit- 
tingly drives  it  towards  the  realisation  of  the  ideal  type  of  State."1 
This  is  laissez-faire  pure  and  simple.2 

These  famous  formulae  have  been  so  often  repeated  and  criticised 
since  that  they  appear  somewhat  trite  to-day.  But  it  is  certain 
that  they  were  not  so  at  the  time.  It  is  easy  to  laugh  at  their  social 
philosophy,  to  mock  at  its  naivete  and  simplicity,  and  to  show  that 
such  supposed  harmony  of  interests  between  men  does  not  exist,  that 
the  interests  of  individuals  do  not  always  coincide  with  those  of  the 
community,  and  that  the  private  citizen  is  not  always  the  best 
judge  even  of  his  own  interests.  It  was  perhaps  necessary  that 
the  science  should  be  born  of  such  extreme  optimism.  No  science 
can  be  constructed  without  some  amount  of  faith  in  a  pre-established 
order. 

Moreover,  laissez-faire  does  not  of  necessity  mean  that 
nothing  will  be  done.  It  is  not  a  doctrine  of  passivity  or  fatalism. 
There  will  be  ample  scope  for  individual  effort,  for  it  simply  means 
leaving  an  open  field  and  securing  fair  play  for  everyone,  free  from 
all  fear  lest  his  own  interests  should  injure  other  people's  or  in  any 
way  prejudice  those  of  the  State.  It  is  true  that  there  will  not  be 
much  work  for  the  Government,  but  the  task  of  that  body  will  by  no 
means  be  a  light  one,  especially  if  it  intends  carrying  out  the  Physio- 
cratic  programme.  This  included  upholding  the  rights  of  private 
property  and  individual  liberty  by  removing  all  artificial  barriers, 
and  punishing  all  those  who  threatened  the  existence  of  any  of  these 

1  Mercier  de  la  Riviere,  vol.  ii,  p.  617. 

1  The  origin  of  the  famous  formula  is  uncertain.  Several  of  the  Physio- 
crats, especially  Mirabeau  and  Mercier  de  la  Riviere,  assign  it  to  Vincent 
de  Gournay,  but  Turgot,  the  friend  and  biographer  of  Vincent  de  Gournay, 
attributes  it,  under  a  slightly  different  form,  laissez-nous  faire,  to  Le  Gendre,  a 
merchant  who  was  a  contemporary  of  Colbert.  Oncken  thinks  that  the  credit 
must  go  to  the  Marquis  d'Argenson,  who  employed  the  term  in  his  Memoires  as 
early  as  the  year  1736.  The  formula  itself  is  quite  commonplace.  It  only  became 
important  when  it  was  adopted  as  the  motto  of  a  famous  school  of  thinkers,  so 
that  this  kind  of  research  has  no  great  interest.  For  a  discussion  of  this  trivial 
question,  see  the  work  of  M.  Schelle,  Vincent  de  Gournay  (1897),  and  especiaJl.v 
Oncken's  Die  Maxime.  Laissez-faire  ei  Laissez-passer  (Berne,  1886). 


12  THE  PHYSIOCRATS 

rights ;   while,  most  important  of  all,  there  was  the  duty  of  giving 
instruction  in  the  laws  of  the  "  natural  order." 


II:  THE  NET  PRODUCT 

EVERY  social  fact  had  a  place  within  the  **  natural  order  "  of  the 
Physiocrats.  Such  a  wide  generalisation  would  have  entitled  them 
to  be  regarded  as  the  founders  of  sociology  rather  than  of  eco- 
nomics. But  there  was  included  one  purely  economic  phenomenon 
which  attracted  their  attention  at  an  early  stage,  and  so  completely 
captivated  their  imaginations  as  to  lead  them  on  a  false  quest.  This 
was  the  predominant  position  which  land  occupied  as  an  agent  of 
production — the  most  erroneous  and  at  the  same  time  the  most 
characteristic  doctrine  in  the  whole  Physiocratic  system. 

Every  productive  undertaking  of  necessity  involves  certain 
outgoings — a  certain  loss.  In  other  words,  some  amount  of  wealth 
is  destroyed  in  the  production  of  new  wealth — an  amount  that 
ought  to  be  subtracted  from  the  amount  of  new  wealth  produced. 
This  difference,  measuring  as  it  does  the  excess  of  the  one  over  the 
other,  constitutes  the  net  increase  of  wealth,  known  since  the  time 
of  the  Physiocrats  as  the  "  net  product." 

The  Physiocrats  believed  that  this  "net  product"  was  confined 
to  one  class  of  production  only,  namely,  agriculture.  Here  alone, 
so  it  seemed  to  them,  the  wealth  produced  was  greater  than  the 
wealth  consumed.  Barring  accidents,  the  labourer  reaped  more 
than  he  consumed,  even  if  we  included  in  his  consumption  his  main- 
tenance throughout  a  whole  year,  and  not  merely  during  the  seasons 
of  harvest  and  tilth.  It  was  because  agricultural  production  had 
this  unique  and  marvellous  power  of  yielding  a  "  net  product "  that 
economy  was  possible  and  civilisation  a  fact.1  It  was  not  true  of 
any  other  class  of  production,  either  of  commerce  or  of  transport, 
where  it  was  very  evident  that  man's  labour  produced  nothing, 
but  merely  replaced  or  transferred  the  products  already  produced. 
Neither  was  it  true  of  manufacture,  where  the  artisan  simply  com- 
bined or  otherwise  modified  the  raw  material. 2 

It  is  true  that  such  transfer  or  accretion  of  matter  may  increase 

1  "  The  prosperity  of  mankind  is  bound  up  with  a  maximum  net  product." 
(Dupont  de  Nemours,  Origine  d'une  Science  nouvette,  p.  346.) 

1  "  Labour  applied  anywhere  except  to  land  is  absolutely  sterile,  for  man  is 
not  a  creator."  (Le  Trosne,  p.  942.) 

"  This  physical  truth  that  the  earth  is  the  source  of  all  commodities  is  so  very 
evident  that  none  of  us  can  doubt  it."  (Le  Trosne,  Inter£t  social,) 

"  The  produce  of   the   soil   may    be    divided    into    two    parts  .  .  .  what 


THE  NET  PRODUCT  13 

the  value  of  the  product,  but  only  in  proportion  to  the  amount  of 
wealth  which  had  to  be  consumed  in  order  to  produce  it ;  because 
the  price  of  manual  labour  is  always  equal  to  the  cost  of  the  neces- 
saries consumed  by  the  worker.  All  that  we  have  in  this  case,  how- 
ever, is  a  collection  of  superimposed  values  with  some  raw  material 
thrown  into  the  bargain.  But,  as  Mercier  de  la  Riviere  put  it, 
"  addition  is  not  multiplication."  x 

Consequently,  industry  was  voted  sterile.  This  implied  no 
contempt  for  industry  and  commerce.  "  Far  from  being  useless, 
these  are  the  arts  that  supply  the  luxuries  as  well  as  the  necessaries 
of  life,  and  upon  these  mankind  is  dependent  both  for  its  preservation 
and  for  its  well-being."  2  They  are  unproductive  in  the  sense  that 
they  produce  no  "  extra  "  wealth. 

It  may  be  pointed  out,  on  the  other  hand,  that  the  "  gains,"  both 
in  industry  and  commerce,  are  far  in  excess  of  those  of  agriculture. 
All  this  was  immaterial  to  the  Physiocrats,  for  "  they  were  gained, 
not  produced."  8  Such  gains  simply  represented  wealth  transferred 

remains  over  is  free  and  disposable,  a  pure  gift  given  to  the  cultivator  in  addition 
to  the  return  for  his  outlay  and  the  wages  of  his  labour."  (Turgot,  Reflexions.) 

"  Raw  material  is  transformed  into  beautiful  and  useful  objects  through  the 
diligence  of  the  artisan,  but  before  his  task  begins  it  is  necessary  that  others 
should  supply  the  raw  material  and  provide  the  necessary  sustenance.  When 
their  part  is  completed  others  should  recompense  them  and  pay  them  for  their 
trouble.  The  cultivators,  on  the  other  hand,  produce  their  own  raw  material, 
whether  for  use  or  for  consumption,  as  well  as  everything  that  is  consumed  by 
others.  This  is  just  where  the  difference  between  a  productive  and  a  sterile 
class  comes  in."  (Baudeau,  Correspondence  avec  M.  Graslin.) 

1  "  A  weaver  buys  food  and  clothing,  giving  150  francs  for  them,  together  with 
a  quantity  of  flax,  for  which  he  gives  50  francs.  The  cloth  will  be  sold  for  200 
francs,  a  sum  that  will  cover  all  expenditure."  (Mercier  de  la  Riviere,  vol.  ii, 
p.  598.)  "  Industry  merely  superimposes  value,  but  does  not  create  any  which 
did  not  previously  exist."  (Ibid.) 

1  Baudeau,  Sphem.  ix  (1770).  One  feels  that  the  Physiocrats  go  too  far  when 
they  say  that  "  the  merchant  who  sells  goods  may  occasionally  prove  as  useful  as 
the  philanthropist  who  gives  them,  because  want  puts  a  price  upon  the  service  of 
the  one  just  as  it  does  upon  the  charity  of  the  other."  (Du  Marchand  de  Grains, 
in  the  Journal  de  F  Agriculture,  du  Commerce,  et  dee  Finances,  December  1773, 
quoted  in  a  thesis  on  the  corn  trade  by  M.  Curmond,  1900.)  We  must  insist  upon 
the  fact  that  "  unproductive  "  or  "  sterile  "  did  not  by  any  means  signify  "  use- 
less." They  saw  clearly  enough  that  the  labour  of  the  weaver  who  makes  linen 
out  of  flax  or  cloth  out  of  wool  is  at  any  rate  as  useful  as  that  of  the  cultivator  who 
produced  the  wool  and  the  flax,  or  rather  that  the  latter's  toil  would  be  perfectly 
useless  without  the  industry  of  the  former.  They  also  realised  that  although  we 
may  say  that  agricultural  labour  is  more  useful  than  that  of  the  weaver  or  the 
mason,  especially  when  the  land  is  used  for  raising  corn,  one  cannot  say  RB 
much  when  that  same  land  is  employed  in  producing  roses,  or  mulberry  treta 
for  rearing  silkworms.  •  Le  Trosne,  p.  946. 


14  THE  PHYSIOCRATS 

from  the  agricultural  to  the  industrial  classes.1  The  agricultural 
classes  furnished  the  artisans  not  only  with  raw  material,  but  also 
with  the  necessaries  of  life.  The  artisans  were  simply  the  domestic 
servants,  or,  to  use  Turgot's  phrase,  the  hirelings  of  the  agricul- 
turists.2 Strictly  speaking,  the  latter  could  keep  the  whole  net 
product  to  themselves,  but  finding  it  more  convenient  they  entrust 
the  making  of  their  clothes,  the  erection  of  their  houses,  and  the 
production  of  their  implements  to  the  artisans,  giving  them  a  portion 
of  the  net  product  as  remuneration.8  It  is  possible,  of  course, 
that,  like  many  servants  in  fine  houses,  the  latter  manage  to  make  a 
very  good  living  at  their  masters'  expense. 

The  "  sterile  classes  "  in  Physiocratic  parlance  simply  signifies 
those  who  draw  their  incomes  second-hand.  The  Physiocrats  had 
the  good  sense  to  try  to  give  an  explanation  of  this  unfortunate 
term,  which  threatened  to  discredit  their  system  altogether,  and 
which  it  seemed  unfair  to  apply  to  a  whole  class  that  had  done  more 
than  any  other  towards  enriching  the  nation. 

It  is  a  debatable  point  whether  the  Physiocrats  attributed 
this  virtue  of  furnishing  a  net  product  solely  to  agriculture  or  whether 
they  intended  it  to  apply  to  extractive  industries,  such  as  mining 
and  fishing.  They  seem  to  apply  it  in  a  general  way  to  mines,  but 
the  references  are  rare  and  not  infrequently  contradictory.  We  can 
understand  their  hesitating,  for,  on  the  one  hand,  mines  undoubtedly 
give  us  new  wealth  in  the  form  of  raw  materials,  just  as  the  land  or 
sea  does  ;  on  the  other  hand,  the  fruits  of  the  earth  and  the  treasures 
of  the  deep  are  not  so  easily  exhausted  as  mines.  Turgot  put  it 
excellently  when  he  said,  "  The  land  produces  fruit  annually,  but 
a  mine  produces  no  fruit.  The  mine  itself  is  the  garnered  fruit," 
and  he  concludes  that  mines,  like  industrial  undertakings,  give  no 
net  product,  that  if  any  one  had  any  claim  to  that  product  it  would 
be  the  owner  of  the  soil,  but  that  in  any  case  the  surplus  would  be 
almost  insignificant.4 

1  "  It  seems  necessary  as  well  as  simple  and  natural  to  distinguish  the  men 
who  pay  others  and  draw  their  wealth  directly  from  nature,  from  the  paid  men, 
who  can  only  obtain  it  as  a  reward  for  useful  and  agreeable  services  which  they 
have  rendered  to  the  former  class."  (Dupont,  vol.  i,  p.  142.) 

1  It  is  rather  strange  that  Turgot  should  have  added  this  qualification,  because 
he  was  more  favourable  to  industry  and  less  devoted  to  agriculture  than  the 
rest  of  the  Physiocrats. 

*  "  I  must  have  a  man  to  make  my  clothes,  just  as  I  must  have  a  doctor  whose 
advice  I  may  ask  concerning  my  health,  or  a  lawyer  concerning  my  affairs,  or 
a  servant  to  work  instead  of  me."     (Le  Trosne,  p.  949.) 

*  On  this  point  see  M.  Pervinquiere,  Contribution  d  V  Etude,  de  la  Productivity 
dans  la  Pkysiocratie.  The  indifference  of  the  Physiocrats  to  mines  shows  a  want  of 


THE  NET  PRODUCT  15 

This  essential  difference  which  the  Physiocrats  sought  to  establish 
between  agricultural  and  industrial  production  was  at  bottom 
theological.  The  fruits  of  the  earth  are  given  by  God,  while  the 
products  of  the  arts  are  wrought  by  man,  who  is  powerless  to  create. l 
The  reply  is  obvious.  God  would  still  be  creator  if  He  decreed  to 
give  us  our  clothes  instead  of  our  daily  bread.  And,  although 
man  cannot  create  matter,  but  simply  transform  it,  it  is  important 
to  remember  that  the  cultivation  of  the  soil,  like  the  fashioning  of 
iron  or  wood,  is  merely  a  process  of  transformation.  They  failed  to 
grasp  the  truth  which  Lavoisier  was  to  demonstrate  so  clearly, 
namely,  that  in  nature  nothing  is  ever  created  and  nothing  lost. 
A  grain  of  corn  sown  in  a  field  obtains  the  materials  for  the  ear 
from  the  soil  and  atmosphere,  transmuting  them  to  suit  its  own 
purpose,  just  as  the  baker,  out  of  that  same  corn,  combined  with 
water,  salt,  and  yeast,  will  make  bread. 

But  they  were  sufficiently  clear-sighted  to  see  that  all  natural 
products,  including  even  corn,  were  influenced  by  the  varying 
condition  of  the  markets,  and  that  if  prices  fell  very  low  the  net 
product  disappeared  altogether.  In  view  of  such  facts  can  it  still 
be  said  that  the  earth  produces  real  value  or  that  its  produce  differs 
in  any  essential  respects  from  the  products  of  industry  ? 

The  Physiocrats  possibly  thought  that  the  bon  prix — i.e.  the 
price  which  yielded  a  surplus  over  and  above  cost  of  production — 
was  a  normal  effect  of  the  "natural  order."  Whenever  the  price 
fell  to  the  level  of  the  cost  of  production  it  was  a  sure  sign  that  the 
"order**  had  been  destroyed.  Under  these  circumstances  there 
was  nothing  remarkable  in  the  disappearance  of  the  net  product. 
This  is  doubtless  the  significance  of  Quesnay's  enigmatic  saying : 
"  Abundance  and  cheapness  are  not  wealth,  scarcity  and  dearness 
are  misery,  abundance  and  dearness  are  opulence."  * 

But  if  the  bon  prix  simply  measures  the  difference  between 
the  value  of  the  product  and  its  cost  of  production,  then  it  is  not 

scientific  spirit,  for  even  from  their  own  point  of  view  the  question  was  one  of 
prime  importance.  No  commodity  could  be  produced  without  raw  material,  and 
wealth  is  simply  a  collection  of  commodities.  Raw  material  is  furnished  by 
the  mine  as  well  as  by  the  soil.  In  the  history  of  mankind  iron  has  played  as  im- 
portant a  part  as  corn.  Agriculture  itself  is  an  extractive  industry,  where  the 
miner — the  agriculturist — uses  plants  instead  of  drills,  and  in  both  cases  the 
product  is  exhaustible. 

1  Le  Trosne,  p.  942. 

"  Land  owes  its  fertility  to  tha  might  of  the  Creator,  and  out  of  His  blessing 
flow  its  inexhaustible  riches.  This  power  is  already  there,  and  man  simply  makes 
use  of  it."  (Le  Trosne,  InterSi  social,  ohap.  1,  §  2.)  §  Quesnay,  p.  325. 


16  THE  PHYSIOCRATS 

more  common  in  agriculture  than  in  other  modes  of  production. 
Nor  does  it  extend  over  a  longer  period  in  the  one  case  than  in  the 
other,  provided  competition  be  operative  in  both  cases  ;  on  the  con- 
trary, it  will  become  manifest  in  the  one  case  as  easily  as  in  the 
other,  especially  if  there  be  any  scarcity.  It  remains  to  be  seen 
then  whether  monopoly  values  are  more  prevalent  in  agricultural 
production  than  in  industrial.  In  a  very  general  way,  seeing  that 
there  is  only  a  limited  quantity  of  land,  we  may  answer  in  the 
affirmative,  and  admit  a  certain  degree  of  validity  in  the  Physio- 
cratic  theory.  But  the  establishment  of  protective  rights  and  the 
occurrence  of  agricultural  crises  clearly  prove  that  competition  also 
has  some  influence  upon  the  amount  of  that  revenue. 

The  net  product  was  just  an  illusion.  The  essence  of  production 
is  not  the  creation  of  matter,  but  simply  the  accretion  of  value. 
But  it  is  not  difficult  to  appreciate  the  nature  of  the  illusion  if  we 
recall  the  circumstances,  and  try  to  visualise  the  kind  of  society 
with  which  the  Physiocrats  were  acquainted.  One  section  of  the 
community,  consisting  solely  of  nobility  and  clergy,  lived  upon  the 
rents  which  the  land  yielded.  Their  luxurious  lives  would  have 
been  impossible  if  the  earth  did  not  yield  something  over  and  above 
the  amount  consumed  by  the  peasant.  It  is  curious  that  the  Physio- 
crats, while  they  regarded  the  artisans  as  nothing  better  than 
servants  who  depended  for  their  very  existence  upon  the  agricul- 
turists, failed  to  recognise  the  equally  complete  dependence  of  the 
worthless  proprietor  upon  his  tenants.  If  there  had  existed 
instead  a  class  of  business  men  living  in  ease  and  luxury,  and 
drawing  their  dividends,  it  is  quite  possible  that  the  Physiocrats 
would  have  concluded  that  there  was  a  net  product  in  industrial 
enterprise. 

So  deeply  rooted  was  this  idea  of  nature,  or  God  operating  through 
nature,  as  the  only  source  of  value  that  we  find  traces  of  it  even  in 
Adam  Smith.  Not  until  we  come  to  Ricardo  do  we  have  a  definite 
contradiction  of  it.  With  Ricardo,  rent,  the  income  derived  from 
land,  instead  of  being  regarded  as  a  blessing  of  nature — the  Alma 
Parens — which  was  bound  to  grow  as  the  "natural  order"  extended 
its  sway,  is  simply  looked  upon  as  the  inevitable  result  of  the  limited 
extent  and  growing  sterility  of  the  land.  No  longer  is  it  a  free  gift 
of  God  to  men,  but  a  pre-imposed  tax  which  the  consumer  has  to 
pay  the  proprietor.  No  longer  is  it  the  net  product ;  henceforth 
it  is  known  as  rent. 

As  to  the  epithet  "  sterile,"  which  was  applied  to  every  kind  of 
work  other  than  agriculture,  we  shall  find  that  it  has  been  superseded. 


THE  NET  PRODUCT  17 

and  that  the  attribute  "  productive  "  has  been  successively  applied  to 
every  class  of  work — first  to  industry,  then  to  commerce,  and  finally 
to  the  liberal  professions.  Even  if  it  were  true  that  industrial  under- 
takings only  yield  the  equivalent  of  the  value  consumed,  that  is 
not  enough  to  justify  the  epithet  "  sterile,"  unless,  as  Adam  Smith 
wittily  remarks,  we  are  by  analogy  to  consider  every  marriage 
sterile  which  does  not  result  in  the  birth  of  more  than  two  children. 
To  invoke  the  distinction  between  addition  and  multiplication  is 
useless,  because  arithmetic  teaches  us  that  multiplication  is  simply 
an  abridged  method  of  adding. 

It  seems  very  curious  that  that  kind  of  wealth  which  appeared 
to  the  Physiocrats  to  be  the  most  legitimate  and  the  most  superior 
kind  should  be  just  the  one  that  owed  nothing  to  labour,  and  which 
later  on,  under  the  name  of  rent,  seems  the  most  difficult  to  justify. 

But  we  must  not  conclude  that  the  Physiocratic  theory  of  the 
net  product  possessed  no  scientific  value. 

It  was  a  challenge  to  the  economic  doctrines  of  the  time,  especially 
Mercantilism.  The  Mercantilists  thought  that  the  only  way  to 
increase  wealth  was  to  exploit  neighbours  and  colonists,  but  they 
failed  to  see  that  commerce  and  agriculture  afforded  equally  satis- 
factory methods.  Nor  must  we  forget  the  Physiocrats'  influence  upon 
practical  politics.  Sully,  the  French  minister,  betrays  evidence  of 
their  influence  when  he  remarks  that  the  only  two  sources  of  national 
wealth  are  land  and  labour.  Let  us  also  remember  that,  despite 
some  glaring  mistakes,  agriculture  has  never  lost  the  pre-eminence 
which  they  gave  it,  and  that  the  recent  revival  of  agricultural 
Protection  is  directly  traceable  to  their  influence.  They  were 
always  staunch  Free  Traders  themselves,  but  we  can  hardly  blame 
them  for  not  being  sufficiently  sanguine  to  expect  such  whole- 
hearted acceptance  of  their  views  as  to  anticipate  some  of  the  more 
curious  developments  of  their  doctrines.  It  is  almost  certain  that 
if  they  were  living  to-day  they  would  not  be  found  supporting  the 
Protectionist  movement.  At  least  this  is  the  opinion  of  M.  Oncken, 
the  economist,  who  has  made  the  most  thorough  study  of  their 
ideas.1 

Although  the  Physiocratic  distinction  between  agriculture  and 
industry  was  largely  imaginary,  it  is  nevertheless  true  that  agriculture 
does  possess  certain  special  features,  such  as  the  power  of  engendering 
the  forces  of  life,  whether  vegetable  or  animal.  This  mysterious 

1  Gtschichte,  der  National  Oekonojnie,  Part  I,  Die  Zeit  vor  Adam  Smith. 
M.  Meline's  book,  Le  Retour  a  la  Terre,  though  Protectionist  in  tone,  is  wholly 
imbued  with  the  Physiocratic  spirit. 


18  THE  PHYSIOCRATS 

force,  which  under  the  term  "  nature  "  was  only  very  dimly  under- 
stood by  the  Physiocrats,  and  still  is  too  often  confused  with 
the  physico-chemical  forces,  does  really  possess  some  characteristics 
which  help  us  to  differentiate  between  agriculture  and  industry. 
At  some  moments  agriculture  seems  inferior  because  its  returns  are 
limited  by  the  exigencies  of  time  and  place  ;  but  more  often  superior 
because  agriculture  alone  can  produce  the  necessaries  of  life.  This 
is  no  insignificant  fact ;  but  we  are  trenching  on  the  difficult  problems 
connected  with  the  name  of  Malthus. 


Ill :  THE  CIRCULATION  OF  WEALTH 

THE  Physiocrats  were  the  first  to  attempt  a  synthesis  of  distribution. 
They  were  anxious  to  know — and  it  was  surely  a  praiseworthy 
ambition — how  wealth  passed  from  one  class  in  society  to  another, 
why  it  always  followed  the  same  routes,  whose  meanderings  they 
were  successful  in  unravelling,  and  how  this  continual  circulation, 
as  Turgot  said,  "  constituted  the  very  life  of  the  body  politic,  just  as 
the  circulation  of  the  blood  did  of  the  physical." 

A  scholar  like  Quesnay,  the  author  of  the  work  on  animal 
economy1  and  a  diligent  student  of  Harvey's  new  discovery,  was 
precisely  the  man  to  carry  the  biological  idea  over  into  the  realm 
of  sociology.  He  made  use  of  the  idea  in  his  Tableau  Sconomique, 
which  is  simply  a  graphic  representation  of  the  way  in  which  the 
circulation  of  wealth  takes  place.  The  appearance  of  this  table  caused 
an  enthusiasm  among  his  contemporaries  that  is  almost  incredible,8 

1  Essai  physique  sur  I'Economie  animate  (1747). 

1  "  There  have  been  since  the  world  began  three  great  inventions  which  have 
principally  given  stability  to  political  societies,  independent  of  many  other  in- 
ventions which  have  enriched  and  advanced  them.  The  first  is  the  invention 
of  writing,  which  alone  gives  human  nature  the  power  of  transmitting  without 
alteration  its  laws,  its  contracts,  its  annals,  and  its  discoveries.  The  second  is 
the  invention  of  money,  which  binds  together  all  the  relations  between  civilised 
societies.  The  third  is  the  Economical  Table,  the  result  of  the  other  two,  which 
completes  them  both  by  perfecting  their  object ;  the  great  discovery  of  our  age, 
but  of  which  our  posterity  will  reap  the  benefit."  (Mirabeau,  quoted  in  Wealth 
of  Nations,  Book  IV,  chap.  9.)  Baudeau  is  no  less  enthusiastic.  "  These 
figures,"  he  writes,  "  are  borrowed  with  the  consent  and  upon  the  advice  of  the 
great  master  whose  genius  first  begat  the  sublime  idea  of  this  Tableau.  The 
Tableau  gives  us  such  a  clear  idea  of  the  premier  position  of  the  science  that  all 
Europe  is  bound  to  accept  its  teaching,  to  the  eternal  glory  of  the  invention  and 
the  everlasting  happiness  of  mankind."  (P.  867.) 

The  first  edition  of  the  Tableau,  of  which  only  a  few  copies  were  printed, 
is  missing  altogether,  but  a  proof  of  that  edition,  corrected  by  Quesnay  himself, 
was  recently  discovered  in  the  Bibliotl:eque  Nationale  in  Paris  by  Professor 


THE  CIRCULATION  OF  WEALTH  19 

although  Professor  Hector  Denis  declares  that  he  is  almost  ready 
to  share  in  Mirabeau's  admiration.1 

We  know  by  this  time  that  this  circulation  is  much  more  com- 
plicated than  the  Physiocrats  believed,  but  it  is  still  worth  while 
to  give  an  outline  of  their  conception.2 

Quesnay  distinguishes  three  social  classes  : 

1.  A  productive  class  consisting  entirely  of  agriculturists — perhaps 
also  of  fishermen  and  miners. 

2.  A  proprietary  class,  including  not  only  landed  proprietors, 
but  also  any  who  have  the  slightest  title  to  sovereignty  of  any  kind 
— a  survival  of  feudalism,  where  the  two  ideas  of  sovereignty  and 
property  are  always  linked  together. 

8.  A  sterile  class,  consisting  of  merchants  and  manufacturers, 
together  with  domestic  servants  and  members  of  the  liberal 
professions. 

The  first  class,  being  the  only  productive  class,  must  supply  all 
that  flow  of  wealth  whose  course  we  are  now  to  follow.  Let  us  sup- 
pose, then — the  figures  are  Quesnay's  and  seem  sufficiently  near  the 
facts — that  the  value  of  the  total  wealth  produced  equals  5  milliard 
francs.  Of  this  5  milliards  2  milliards  are  necessary  for  the  upkeep 
of  the  members  of  this  class  and  its  oxen  during  harvest  and  sowing. 
This  portion  does  not  circulate.  It  simply  remains  where  it  was 
produced.  The  produce  representing  the  remaining  3  milliards  is  sold. 

Stephen  Bauer,  of  the  University  of  Bale.  A  facsimile  was  published  by  the 
British  Economic  Association  in  1894. 

1  "  The  discovery  of  the  circulation  of  wealth  in  economic  societies  occupies 
in  the  history  of  the  science  the  same  position  as  is  occupied  by  the  discovery 
of  the  circulation  of  the  blood  in  the  history  of  biology." 

*  Quesnay's  table  consists  of  a  number  of  columns  placed  in  juxtaposition 
with  a  number  of  zigzag  lines  which  cross  from  one  column  to  another.  If  he  had 
been  living  now  he  would  almost  certainly  have  used  the  graphic  method,  which 
would  have  simplified  matters  very  considerably,  and  it  is  somewhat  strange 
that  no  one  has  attempted  this  with  his  Tableau.  Hector  Denis  has  compared  his 
tables  with  those  of  the  anatomist  and  traced  a  parallel  between  the  links  of  the 
economical  world  and  the  plexus  of  veins  and  arteries  in  the  human  body. 

His  explanation  of  the  Tableau  by  means  of  mathematical  tables  gives  him 
a  claim  to  be  considered  a  pioneer  of  the  Mathematical  school.  Full  justice 
has  been  done  to  him  in  this  respect.  An  article  by  Bauer  in  the  Quarterly 
Journal  of  Economics,  1890,  recognises  his  claim,  and  there  is  another  by  Oncken 
in  the  Economic  Journal  for  June  1896,  entitled  The  Physiocrats  as  Founders 
of  the  Mathematical  School.  His  contemporary  Le  Trosne  is  even  more  emphatic 
on  the  point :  "  Economic  science,  being  a  study  of  measurable  objects,  is  an 
exact  science,  and  its  conclusions  may  be  mathematically  tested.  What  the 
science  lacked  was  a  convenient  formula  which  might  be  applied  to  test  its 
general  conclusions.  Such  a  formula  we  now  have  in  the  Tableau  iconomique." 
(De  I'Ordre  social,  viii,  p.  218.) 


20  THE   PHYSIOCRATS 

But  agricultural  products  alone  do  not  suffice  for  the  upkeep  of  Class  1. 
Manufactured  goods,  clothes,  and  boots  also  are  required,  and  these  are 
got  from  the  industrial  classes,  for  which  a  milliard  francs  is  given. 

There  remain  just  2  milliards,  which  go  to  the  landowners  and  the 
Government  in  rents  and  taxes.  By  and  by  we  shall  see  how  they 
attempted  to  justify  this  apparent  parasitism. 

Let  us  pass  on  to  consider  the  propertied  class,  It  manages 
to  live  upon  the  2  milliards  which  it  receives  by  way  of  rents,  and 
it  lives  well.  Its  food  it  must  obtain  from  the  agricultural  class 
(unless,  of  course,  the  rents  are  paid  in  kind),  and  for  this  it  possibly 
pays  a  milliard  francs.  It  also  requires  manufactured  goods,  which 
it  must  get  from  the  sterile  class,  and  for  which  it  pays  another 
milliard  francs.  This  completes  their  account. 

As  to  the  sterile  class,  it  produces  nothing,  and  so,  unlike  the 
preceding  class,  it  can  only  get  its  necessaries  second-hand  from  the 
productive  class.  These  may  be  got  in  two  ways :  a  milliard  from 
the  agricultural  class  in  payment  for  manufactured  goods  and 
another  milliard  from  the  landed  proprietors.  The  latter  milliard 
being  one  of  the  two  which  the  landed  proprietors  got  from  the  agri- 
culturists, has  in  this  way  described  the  complete  circle. 

The  2  milliards  obtained  as  salaries  by  the  sterile  class  are 
employed  in  buying  the  necessaries  of  life  and  the  raw  material 
of  industry.  And  since  it  is  only  the  productive  class  that  can 
procure  these  necessaries  and  raw  materials,  this  2  milliards  passes 
into  the  hands  of  the  agriculturists.  The  2  milliards,  in  short, 
return  to  their  starting-point.  Adding  the  milliard  already  paid 
by  the  landed  proprietors  to  the  2  milliards'  worth  of  products 
unsold,  the  total  of  5  milliards  is  replaced  in  the  hands  of  the  pro- 
ductive class,  and  so  the  process  goes  on  indefinitely.1 

This  resumt  gives  but  a  very  imperfect  idea  of  the  vast  com- 
plexities and  difficulties  involved  in  tracing  the  growth  of  revenues 
— an  evolution  which  the  Physiocrats  followed  with  the  enthu- 
siasm of  children.  They  imagined  that  it  was  all  very  real.2  The 

1  Turgot,  although  he  is  not  speaking  of  the  Tableau  itself  in  this  case,  sums 
it  up  admirably  in  the  following :  "  "What  the  labourers  get  from  the  land  in 
addition  to  what  is  sufficient  to  supply  their  own  needs  constitutes  the  only 
wages  fund  [note  the  phrase],  which  all  the  other  members  of  society  can  draw 
upon  in  return  for  their  labour.  The  other  members  of  society,  when  they 
buy  the  commodities  which  the  labourer  has  produced,  simply  give  him  the  btire 
equivalent  of  what  it  has  cost  the  labourer  to  produce  them."  (Turgot,  vol.  i,  p.  10.) 
For  a  more  detailed  account  see  Baudeau,  Explication  du  Tableau  iconomique. 

a  "  This  movement  of  commerce  from  one  class  to  another,  and  the  conditions 
which  give  riee  to  it,  are  not  mere  hypotheses.  A  little  reflection  will  show  that 
they  are  faithfully  copied  from  nature."  (Quesnay,  p.  60.) 


THE  CIRCULATION  OF  WEALTH  21 

rediscovery  of  their  millions  intoxicated  them,  but,  like  many  of  the 
mathematical  economists  of  to-day,  they  forgot  that  at  the  end  of 
their  calculations  they  only  had  what  they  had  assumed  at  the 
beginning.  It  is  very  evident  that  the  table  proves  nothing  as  to 
the  essential  point  in  their  system,  namely,  whether  there  really 
exist  a  productive  and  a  sterile  class.1 

The  most  interesting  thing  in  the  Physiocratic  scheme  of  distri- 
bution is  not  the  particular  demonstration  which  they  gave  of  it,  but 
the  emphasis  which  they  laid  upon  the  fact  of  the  circulation  of 
wealth  taking  place  in  accordance  with  certain  laws,  and  the  way  in 
which  the  revenue  of  each  class  was  determined  by  this  circulation. 
The  singular  position  which  the  proprietors  hold  in  this  tripartite 
division  of  society  is  one  of  the  most  curious  features  of  the 
system. 

Anyone  examining  the  table  in  a  non-Physiocratic  fashion, 
but  simply  viewing  it  in  the  modern  spirit,  must  at  once  feel  surprised 
and  disappointed  to  find  that  the  class  which  enjoys  two-fifths  of 
the  national  revenue  does  nothing  in  return  for  it.  We  should 
not  have  been  surprised  if  such  glaring  parasitism  had  given  to 
the  work  of  the  Physiocrats  a  distinctly  socialistic  tone.  But  they 
were  quite  impervious  to  all  such  ideas.  They  never  appreciated 
the  weakness  of  the  landowners'  position,  and  they  always  treated 
them  with  the  greatest  reverence.  The  epithet  "  sterile  "  is  applied, 
not  to  them,  but  to  manufacturers  and  artisans  I  Property  is  the 
foundation-stone  of  the  "  natural  order."  The  proprietors  have  been 
entrusted  with  the  task  of  supplying  the  staff  of  life,  and  are  endued 
with  a  kind  of  priestly  sacredness.  It  is  from  their  hands  that  all  of 
us  receive  the  elements  of  nutrition.  It  is  a  **  divine  "  institution — 
the  word  is  there.2  Such  idolatry  needs  some  explanation. 

One  might  have  expected — even  from  their  own  point  of  view — 
that  the  premier  position  would  have  been  given  to  the  class  which 
they  termed  productive,  i.e.  to  the  cultivators  of  the  soil,  who  were 

1  They  imagined  that  it  was  actually  so.  "  On  the  one  hand,  we  see  the  pro- 
ductive class  living  on  a  series  of  payments,  which  are  given  in  return  for  its 
labour,  and  always  bearing  a  close  relation  to  the  outlay  upon  its  upkeep.  On 
the  other,  there  is  nothing  but  consumption  and  annihilation  of  goods,  but  no 
production."  (Quesnay,  p.  60.) 

1  "  It  is  impossible  not  to  recognise  the  right  of  property  as  a  divine  institution, 
for  it  has  been  ordained  that  this  should  be  the  indirect  means  of  perpetuating 
the  work  of  creation."  (La  Rivi4re,  p.  618.)  "The  order  of  society  presupposes 
the  existence  of  a  third  class  in  society,  namely,  the  proprietors  who  make  pre- 
paration for  the  work  of  cultivation  and  who  dispense  the  net  product. "  ( Quesnay, 
p.  181.) 


22  THE  PHYSIOCRATS 

mostly  farmers  and  mltayers.  The  land  was  not  of  their  making,  it 
is  true.  They  had  simply  received  it  from  the  proprietors.  This 
latter  class  takes  precedence  because  God  has  willed  that  it  should 
be  the  first  dispenser  of  all  wealth.1 

There  is  no  need  to  insist  on  this  strange  aberration  which  led 
them  to  look  for  the  creator  of  the  land  and  its  products,  not  amid 
the  cultivators  of  the  soil,  but  among  the  idlers.2  Such  was  the 
logical  conclusion  of  their  argument.  We  must  also  remember  that 
the  Physiocrats  failed  to  realise  the  inherent  dignity  of  all  true 
labour  simply  because  it  was  not  the  creator  of  wealth.  This 
applied  both  to  the  agricultural  labourer  and  the  industrial  worker, 
and  though  the  former  alone  was  considered  productive  it  was 
because  he  was  working  in  co-operation  with  nature.  It  was  nature 
that  produced  the  wealth  and  not  the  worker. 

Something  must  also  be  attributed  to  their  environment.  Knowing 
only  feudal  society,  with  its  economic  and  political  activities  governed 
and  directed  by  idle  proprietors,  they  suffered  from  an  illusion  as 
to  the  necessity  for  landed  property  similar  to  that  which  led 
Aristotle  to  defend  the  institution  of  slavery. 8 

Although  they  failed  to  foresee  the  criticisms  that  would  be 
levelled  against  the  institution  of  private  property,  they  were  very 
assiduous — especially  the  Abbe  Baudeau — in  seeking  an  explanation 
of  its  origin  and  a  justification  of  its  existence.  The  reasons  which 
they  advanced  are  more  worthy  of  quotation  than  almost  any 
argument  that  has  since  been  employed  by  conservative  economists. 

The  most  solid  argument,  in  their  opinion — at  least  the  one  that 
was  most  frequently  used — is  that  these  proprietors  are  either  the 
men  who  cleared  and  drained  the  land  or  else  their  rightful  descendants. 
They  have  incurred  or  they  are  incurring  expenditure  in  clearing 
the  land,  enclosing  it  and  building  upon  it — what  the  Physiocrats 
call  the  avances  fancier  es*  They  never  get  their  revenues  through 

1  "  Immediately  below  the  landed  proprietors  come  the  productive  classes, 
whose  labour  is  the  only  source  of  their  income,  but  who  cannot  exercise  that 
labour  unless  the  landlord  has  already  incurred  some  outlay  in  the  way  of  ground 
expenses."  (Baudeau,  p.  691.) 

a  The  Physiocrats  never  mention  the  agricultural  workers,  and  one  might 
almost  think  that  there  were  none.  Their  solicitude  for  the  agriculturists  does 
not  extend  beyond  the  farmers  and  mttayers.  M.  Weulersse  has  referred  to 
their  system,  not  without  some  justification,  as  an  essentially  capitalistic  one. 

1  "  We  may  call  them  the  nobility,  as  well  as  the  propertied  class.  Nobility 
in  this  sense,  far  from  being  illusory,  is  a  very  useful  institution  in  the  history  of 
civilised  nations."  (Baudeau,  p.  670.) 

4  "  In  the  third  line — they  generally  occupy  the  first  rank — we  have  the 
landed  proprietors  who  prepare  the  soil,  build  houses,  make  plantations  and 


THE  CIRCULATION  OF  WEALTH  23 

some  one  else  as  the  manufacturers  do,  and  they  are  anything  but 
parasites.  Their  portion  is  optima  jure,  in  virtue  of  a  right  prior  and 
superior  even  to  that  of  the  cultivators,  for  although  the  cultivators 
help  to  make  the  product,  the  proprietors  help  to  make  the  land. 
The  three  social  classes  of  the  Physiocratic  scheme  may  be  likened 
to  three  persons  who  get  their  water  from  the  same  well.  It  is 
drawn  from  the  well  by  members  of  the  productive  class  in  bucket- 
enclosures  at  their  own  expense  or  who  pay  for  those  outlays  by  buying  property 
already  developed.  This  revenue,  they  might  argue,  belongs  to  us  because  of 
the  wisdom  and  forethought  we  have  exercised  in  preparing  the  land,  in  under- 
taking to  keep  it  in  repair,  and  to  improve  it  still  further."  (Baudeau,  PhilO' 
sophic  iconomique,  p.  757. )  "  The  foremost  and  most  essential  agent  of  production 
must  be  that  man  who  makes  it  possible.  But  who  is  this  agent  but  the  landed 
proprietor,  whose  claims  to  his  prerogatives  are  based  upon  the  need  for  his 
productive  services  ?  "  (Mercier  de  la  Riviere,  pp.  466-467.) 

"  It  is  this  expenditure  that  makes  the  claim  of  proprietors  real  and  their 
existence  just  and  necessary.  Until  such  expenditure  is  incurred  the  right 
of  property  is  merely  an  exclusive  right  to  make  the  soil  capable  of  bearing 
fruit."  (Baudeau,  p.  851.)  In  other  words,  so  long  as  the  proprietor  has  not 
incurred  some  expenditure  the  right  of  property  is  simply  reduced  to  occupation. 

The  Physiocrats  distinguished  three  kinds  of  avarices : 

1.  The  annual  expenditure  (avarices  annuelles)  incurred  in  connection  with 
the  actual  work  of  cultivation,  which  recurs  every  year,  such  as  the  cost  of  seed 
and  manure,  cost  of  maintaining  labourers,  etc.    The  annual  harvest  ought  to 
repay  all  this,  which  to-day  would  be  called  circulating  capital. 

2.  The  "  original  "  outlay  (avarices  primitives)  involved  in  buying  cattle  and 
implements  which  render  service  for  a  number  of  years,  and  for  which  the  pro- 
prietor does  not  expect  to  be  recompensed  in  a  single  year.    The  return  is  spread 
out  over  a  number  of  years.     Here  we  have  the  distinction  between  fixed  and 
circulating  capital,  and  the  idea  of  the  gradual  redemption  of  the  former  as  against 
the  total  repayment  of  the  latter  at  one  single  use.    It  did  not  escape  the  Physio- 
crats' notice  that  an  intelligent  increase  of  the  fixed  might  gradually  reduce  the 
annual  expenditure.     Such  ideas  were  quite  novel.     But  they  immediately  took 
their  place  as  definite  contributions  to  the  science.    They  are  no  longer  confined 
to  agriculture,  however,  but  apply  equally  to  all  branches  of  production. 

3.  The  avances  foncieres  are  the  expenses  which  are  undertaken  with  a  view  to 
preparing  the  land  for  cultivation.  (The  adjective  "  primitive  "  would  have  been 
better  applied  here.) 

The  first  two  kinds  of  expenditure  are  incumbent  upon  the  agriculturist  and 
entitle  him  to  a  remuneration  sufficient  to  cover  his  expenses. 

The  third  is  incumbent  upon  the  proprietor  and  constitutes  his  claim  to  a 
share  of  the  funds.  "  Before  you  can  set  up  a  farm  where  agriculture  may  be 
steadily  practised  year  in  and  year  out  what  must  be  done  ?  A  block  of  buildings 
and  a  farmhouse  must  be  built,  roads  made  and  plantations  set,  the  soil  must 
be  prepared,  the  stones  cleared,  trees  cut  down  and  roots  removed  ;  drains  must 
also  be  cut  and  shelters  prepared.  These  are  the  avances  foncieres,  the  work 
that  is  incumbent  upon  proprietors,  and  the  true  basis  of  their  claim  to  the 
privileges  of  proprietorship."  (Baudeau,  Ephtmtrides,  May  1776.  A  reply  to 
Condillao.) 


24  THE  PHYSIOCRATS 

fuls,  which  are  passed  on  to  the  proprietors,  but  the  latter  class 
gives  nothing  in  return  for  it,  for  the  well  is  of  their  making.  At  a 
respectable  distance  comes  the  sterile  class,  obliged  to  buy  water  in 
exchange  for  its  labour.1 

The  Physiocrats  failed  to  notice  the  contradiction  involved  in 
this.  If  the  revenue  which  the  proprietor  draws  represents  the 
remuneration  for  his  outlay  and  the  return  for  his  expenditure  it  is 
no  longer  a  gift  of  nature,  and  the  net  product  vanishes,  for,  by 
definition,  it  represented  what  was  left  of  the  gross  product  after 
paying  all  initial  expenses — the  excess  over  cost  of  production.  If  we 
accept  this  explanation  of  the  facts  there  is  no  longer  any  surplus 
to  dispose  of.  It  is  as  capitalists  pure  and  simple  and  not  as  the 
representatives  of  God  that  proprietors  obtain  their  rents. 

Must  we  really  believe  that  although  these  outlays  afford  some 
explanation  of  the  existence  of  private  property  they  supply  no 
means  of  measuring  or  of  limiting  its  extent  ?  Is  there  no  connection 
between  these  outlays  and  the  revenues  which  landed  proprietors 
draw  ? 

Or  must  we  distinguish  between  the  two  portions  of  the  revenue — 
the  one,  indispensable,  representing  the  reimbursement  of  the 
original  outlay,  and  in  every  respect  comparable  to  the  revenue  of 
the  farmer,  and  the  other,  being  a  true  surplus,  constituting  the 
net  product  ?  How  can  they  justify  the  appropriation  of  the 
latter  ? 

There  is  another  argument  held  in  reserve,  namely,  that  based 
upon  social  utility.  They  point  out  that  the  cultivation  of  land 
would  cease  and  the  one  source  of  all  wealth  would  become  barren 
if  the  pioneer  were  not  allowed  to  reap  the  fruits  of  his  labour. 

The  new  argument  is  a  contradiction  of  the  old.  In  the  former 
case  land  was  appropriated  because  it  had  been  cultivated.  In  the 
present  case  land  must  be  appropriated  before  it  can  be  cultivated. 
In  the  former  labour  is  treated  as  the  efficient  cause,  in  the  latter 
as  the  final  cause  of  production. 

Finally,  the  Physiocrats  believed  that  landed  proprietorship  was 
simply  the  direct  outcome  of  "  personal  property,"  or  of  the  right 
of  every  man  to  provide  for  his  own  sustenance.  This  right  includes 
the  right  of  personal  estate,  which  in  turn  involves  the  right  of  landed 
property.  These  three  kinds  of  property  are  so  closely  connected 

1  "  Without  that  sense  of  security  which  property  gives,  the  land  would  still  be 
uncultivated."  (Quesnay,  Mateimes,  iv. )  "  Everything  would  be  lost  if  this  fount 
of  wealth  were  not  as  well  assured  as  the  person  of  the  individual."  (Dupont, 
vol.  i.  p.  26.) 


THE  CIRCULATION  OF  WEALTH  25 

that  in  reality  they  form  one  unit,  and  no  one  of  the  three  can  be 
detached  without  involving  the  destruction  of  the  other  two.1 
They  were  full  of  veneration  for  property  of  every  description — 
not  merely  for  landed  property.  "  The  safety  of  private  property 
is  the  real  basis  of  the  economic  order  of  society,"  says  Quesnay.2 
Mercier  de  la  Riviere  writes :  "  Property  may  be  regarded  as  a 
tree  of  which  social  institutions  are  branches  growing  out  of  the 
trunk."  3  We  shall  encounter  this  cult  of  property  even  during 
the  terrible  days  of  the  French  Revolution  and  the  Reign  of  Terror. 
When  all  respect  for  human  life  was  quite  lost  there  still  remained 
this  respect  for  property. 

The  defence  of  private  property  was  already  well-nigh  complete.4 
But  if  they  were  strong  in  their  defence  of  the  institution  they  did  not 
fail  to  impose  upon  it  some  onerous  duties^which  counterbalanced 
its  eminent  dignity.  Of  course,  every  proprietor  should  always  be 
guided  by  reason  and  be  mannerly  in  his  behaviour,  and  he  should 
never  allow  mere  authority  to  become  the  rule  of  life.5  Their  duties 
are  as  follows  : 

1.  They  must  continue  without  fail  to  bring  lands  into  culti- 
vation, i.e.  they  must  continue  the  avances  fonder vs.* 

2.  They  must  dispose  of  the  wealth  which  the  nation  has  pro- 
duced in  such  a  way  as  to  further  the  general  interest ;  this  is  their 
task  as  the  stewards  of  society.7 

3.  They  must  aim  during  their  leisure  at  giving  to  society  all 
those  gratuitous  services  which  they  can  render,  and  which  society 
so  sorely  needs. 

4.  They  must  bear  the  whole  burden  of  taxation. 

1  Mercier  de  la  Riviere,  vol.  i,  p.  242. 

*  Maximes,  iv.  •  Pp.  615,  617. 

*  It  is  necessary  to  make  a  note  here  of  one  of  the  many  differences  between 
Turgot  and  the  Physiocrats.     Turgot  seems  much  less  firmly  convinced  of  the 
social  utility  of  landed  property  and  of  the  legitimacy  of  the  right  of  property. 
He    thinks    that  its  origin  is  simply  due  to  occupation.     This  weakens  the 
Physiocratic  case  very  considerably.     "  The  earth  is  peopled  and  cultivation 
extends.     The  best  lands  will  in  time  all  be  occupied.     For  the  last  comers 
there  will  only  be  the  unfertile  lands  rejected  by  the  first.     In  the  end  every 
piece  of  land  will  have  its  owner,  and  those  who  possess  none  will  have  no  other 
resource  than  to  exchange  the  labour  of  their  arm  for  the  superfluous  corn  of  the 
proprietor."     (Vol.  i,  p.  12.)    We  are  here  not  very  far  from  the  Ricardian  theory. 

8  Baudeau,  p.  378. 

*  "  A  proprietor  who  keeps  up  the  avances  fonci&res  without  fail  is  performing 
the  noblest  service  that  anyone  can  perform  on  this  earth."     (Baudeau.  J 

7  "The  rich  have  the  control  of  the  fund  from  which  the  workers  are  paid, 
but  they  are  doing  a  great  injustice  if  they  appropriate  it."  (Quesnay,  vol.  i, 
p.  193.) 

E.I>.  B 


26  THE  PHYSIOCRATS 

5.  Above  all  they  must  protect  their  tenants,  the  agriculturists, 
and  be  very  careful  not  to  demand  more  than  the  net  product. 
The  Physiocrats  never  go  the  length  of  advising  them  to  give  to  their 
tenants  a  portion  of  the  net  product,  but  they  impress  upon  them  the 
importance  of  giving  them  the  equivalent  of  their  annual  expenditure 
and  of  dealing  liberally  with  them.  It  does  not  seem  much,  but  it 
must  have  been  something  in  those  days.  "  I  say  it  boldly,"  writes 
Baudeau,  "  cursed  be  every  proprietor,  every  sovereign  and  emperor 
that  puts  all  the  burden  upon  the  peasant,  and  the  land,  which 
gives  all  of  us  our  sustenance.  Show  them  that  the  lot  of  the 
worthy  individuals  who  employ  their  own  funds  or  who  depend 
upon  those  of  others  is  to  none  of  us  a  matter  of  complete  indifference, 
that  whoever  hurts  or  degrades,  attacks  or  robs  them  is  the  cruellest 
enemy  of  society,  and  that  he  who  ennobles  them,  furthers  their 
well-being,  comfort,  or  leisure  increases  their  output  of  wealth, 
which  after  all  is  the  one  source  of  income  for  every  class  in  society."  * 
Such  generous  words,  which  were  none  too  common  at  the  time, 
release  the  Physiocrats  from  the  taunt  of  showing  too  great  a  favour 
to  the  proprietors.  In  return  for  such  privileges  as  they  gave  them 
they  demanded  an  amount  of  social  service  far  beyond  anything  that 
was  customary  at  the  time. 

II 

So  far  we  have  considered  only  the  Physiocratic  theory.  But  the 
Physiocratic  influence  can  be  much  more  clearly  traced  if  we  turn  to 
applied  economics  and  examine  their  treatment  of  such  questions  as 
the  regulation  of  industry,  the  functions  of  the  State,  and  the  problems 
of  taxation.2 

1  Pp.  835,  839.  And  Mercier  de  la  Riviere  writes  in  terms  not  less  severe ; 
"  He  is  responsible  under  pain  of  annihilation  for  the  products  of  society,  and 
no  part  of  the  produce  which  goes  to  support  the  cultivator  should  wittingly 
be  employed  otherwise."  The  history  of  Ireland  is  an  interesting  commentary 
on  these  words. 

But  let  us  always  remember  that  when  the  Physiocrats  speak  of  the  rights 
of  the  cultivator  they  think  only  of  the  farmer  and  metayer  and  never  of  the 
paid  agriculturist.  They  are  content  to  demand  merely  a  decent  existence  for  the 
latter.  Were  they  put  too  nmch  at  ease  they  would  perhaps  leave  off  working. 
Seo  Weulersse,  vol.  ii,  p.  729.  He  seems  a  little  unjust,  and  quotes  some  words  of 
Quesnay,  who  protests  against  the  belief  that  "  the  poor  must  be  kept  poor  if  they 
are  not  to  become  indolent." 

1  One  is  perhaps  surprised  to  find  that  freedom  of  work-  mother  words,  the 
abolition  of  corporations — is  not  included  in  their  list,  especially  since  the  credit 
for  the  downfall  of  those  institutions  is  usually  given  to  the  Physiocrats.  Their 
writings  contain  only  very  occasional  reference  to  this  topic,  beoausa  industrial 


TRADE  27 

I:  TRADE 

ALL  exchange,  the  Physiocrats  thought,  was  unproductive,  for 
by  definition  it  implies  a  transfer  of  equal  values.  If  each  party 
Dnly  receives  the  exact  equivalent  of  what  it  gives  there  is  no  wealth 
produced.  It  may  happen,  however,  that  the  parties  to  the  exchange 
are  of  unequal  strength,  and  the  one  may  grow  rich  at  the  expense 
of  the  other.1  In  giving  a  bottle  of  wine  in  exchange  for  a  loaf  of 
bread  there  is  a  double  displacement  of  wealth,  which  evidently 
affords  a  fuller  satisfaction  of  wants  in  both  cases,  but  there  is  no 
wealth  created,  for  the  objects  so  exchanged  are  of  equal  value. 
To-day  the  reasoning  would  be  quite  different.  The  present-day 
economist  would  argue  as  follows :  "  If  I  exchange  my  wine  for 
your  bread,  that  is  a  proof  that  my  hunger  is  greater  than  my 
thirst,  but  that  you  are  more  thirsty  than  hungry.  Consequently 
the  wine  has  increased  in  utility  in  passing  from  my  hands  into 
yours,  and  the  bread,  likewise,  in  passing  from  your  hands  into 
mine,  and  this  double  increase  of  utility  constitutes  a  real  increase 
of  wealth."  Such  reasoning  would  have  appeared  absurd  to  the 
Physiocrats,  who  conceived  of  wealth  as  something  material,  and 
they  could  never  have  understood  how  the  creation  of  a  purely 
subjective  attribute  like  utility  could  ever  be  considered  pro- 
ductive. 

We  have  already  had  occasion  to  remark  that  industry  and 
commerce  were  considered  unproductive.  This  was  a  most  signi- 
ficant fact,  so  far  as  commerce  was  concerned,  because  all  the 
theories  that  held  the  field  under  Mercantilism,  notably  the  doctrine 
that  foreign  commerce  afforded  the  only  possible  means  of  increasing 
a  country's  wealth,  immediately  assumed  a  dwindling  importance. 
For  the  Mercantilists  the  prototype  of  the  State  was  a  rich  merchant 
of  Amsterdam.  For  the  Physiocrats  it  was  John  Bull. 

labour  is  regarded  as  sterile,  and  reform  touching  its  organisation  concerned  them 
but  little.  They  did,  however,  protest  against  the  rule  that  confined  the  right  to 
engage  in  a  trade  to  those  who  had  received  an  express  privilege  from  the  Crown. 
They  considered  that  "  to  an  honest  soul  this  was  the  most  odious  maxim  which 
the  spirit  of  domination  and  rapacity  ever  invented."  (Baudeau,  in  fiphkmi- 
rides,  1768,  vol.  iv.)  Turgot's  famous  Edict  of  January  1776,  abolishing  the 
rights  of  corporations  and  establishing  liberty  for  all,  is,  with  good  reason,  attri- 
buted to  Physiocratic  influence. 

1  "  Exchange  is  a  contract  of  equality,  equal  value  being  given  in  exchange 
for  equal  value.  Consequently  it  is  not  a  means  of  increasing  wealth,  for  one 
gives  as  much  as  the  other  receives,  but  it  is  a  means  of  satisfying  wants  and  of 
varying  enjoyment."  (Le  Trosne,  pp.  903,  904.)  But  what  does  this  satisfying 
of  wants  and  variation  of  enjoyment  signify  if  it  d^e*  r  ot  n  can  increased  wealth  f 


28  THE  PHYSIOCRATS 

And  foreign  trade,  like  domestic,  produced  no  real  wealth : 
the  only  result  was  a  possible  gain,  and  one  man's  gain  is  another 
man's  loss.  *'  Every  commercial  nation  flatters  itself  upon  its 
growing  wealth  as  the  outcome  of  foreign  trade.  This  is  a  truly 
astonishing  phenomenon,  for  they  all  believe  that  they  are  growing  rich 
and  gaining  from  one  another.  It  must  be  admitted  that  this  gain, 
as  they  call  it,  is  a  most  remarkable  thing,  for  they  all  gain  and  none 
loses."  *  A  country  must,  of  course,  obtain  from  foreigners  the 
goods  which  it  cannot  itself  produce  in  exchange  for  those  it  cannot 
itself  consume.  Foreign  trade  is  quite  indispensable,  but  Mercier 
de  la  Riviere  thinks  that  it  is  a  necessary  evil  a  (he  underlines  the 
word).  Quesnay  contents  himself  with  referring  to  it  merely  as 
&  pis  aller.3  He  thought  that  the  only  really  useful  exchange  is  one 
in  which  agricultural  products  pass  directly  from  producers  to  con- 
sumers, for  without  this  the  products  would  be  useless  and  would 
simply  perish  in  the  producer's  hands.  But  that  kind  of  exchange 
which  consists  in  buying  products  in  order  to  resell  them — trafficking, 
or  a  commercial  transaction,  as  we  call  it — is  sheer  waste,  for  the 
wealth  instead  of  growing  larger  becomes  less,  because  a  portion  of 
it  is  absorbed  by  the  traffickers  themselves.4  We  meet  with  the 
same  idea  in  Carey.  Mercier  de  la  Rividre  ingeniously  compares 
such  traders  to  mirrors,  arranged  in  such  a  way  that  they  reflect 
a  number  of  things  at  the  same  time,  all  in  different  positions. 
"  Like  mirrors,  too,  the  traders  seem  to  multiply  commodities,  but 
they  only  deceive  the  superficial."  6 

That  may  be ;  but,  admitting  a  contempt  for  commerce,  what 
conclusions  do  they  draw  from  it  ?  Shall  they  prohibit  it,  or  regulate 
it,  or  shall  they  just  let  it  take  its  own  course  ?  Any  one  of  these 
conclusions  would  follow  from  their  premises.  If  commerce  be  as 
useless  as  they  tried  to  make  out,  the  first  solution  would  be  the 
best.  But  it  was  the  third  that  they  were  inclined  to  adopt,  and  we 
must  see  why. 

1  Mercier  de  la  Riviere,  p.  545.  *  P.  54.8. 

*  "  The  settlement  of  international  indebtedness  by  payment  of  money  Is 
a  mere  pis  aller  of  foreign  trade,  adopted  by  those  nations  which  are  unable 
to  give  commodities  in  return  for  commodities  according  to  custom.  And 
foreign  trade  itself  is  a  mere  pis  aller  adopted  by  those  nations  whose  home 
trade  is  insufficient  to  enable  them  to  make  the  best  use  of  their  own  productions. 
It  is  very  strange  that  anyone  should  have  laid  such  stress  upon  a  mere  pis  aller 
of  commerce."  (Quesnay's  Dialogues,  p.  175.) 

4  "  After  all  merchants  are  only  traffickers,  and  the  trafficker  is  just  a  person 
who  employs  his  ability  in  appropriating  a  part  of  other  people's  wealth." 
(Mercier  de  la  Riviere,  p.  551.)  "Merchants'  gains  are  not  a  species  of  profit." 
(Quesnay,  p,  151.J  6  Ordre  Naturel,  p.  538. 


TRADE  29 

It  seems  quite  evident  that  the  Physiocrats  would  have  condemned 
both  the  Mercantile  and  the  Colbertian  systems.  Both  of  these 
aimed  at  securing  a  favourable  balance  of  trade — an  aim  which 
the  Physiocrats  considered  illusory,  if  not  actually  immoral.  But 
if  they  thought  all  trade  was  useless  it  is  not  easy  to  understand  their 
enthusiasm  for  Free  Trade.  Those  economists  who  nowadays  favour 
Free  Trade  support  it  in  the  belief  that  it  is  of  immense  benefit  to 
every  country  wherein  it  is  practised,  and  that  the  more  it  is 
developed  the  richer  will  the  exchanging  countries  become.  But 
such  was  not  the  Physiocratic  doctrine.  It  is  a  noteworthy  fact  that 
they  are  to  be  regarded  as  the  founders  of  Free  Trade,  not  because 
of  any  desire  to  favour  trade  as  such,  but  because  their  attitude 
towards  it  was  one  of  disdainful  laissez-faire.  They  were  not, 
perhaps,  altogether  free  from  the  belief  that  laissez-faire  would  lead 
to  the  disappearance  of  commerce  altogether.  They  were  Free 
Traders  primarily  because  they  desired  the  freedom  of  domestic 
trade,  and  we  must  not  lose  sight  of  those  extraordinary  regulations 
which  completely  fettered  its  movements  at  this  time.1 

The  "  natural  order  "  also  implied  that  each  one  would  be  free  to 
buy  or  sell  wherever  he  chose,  within  or  without  the  country.  It 
recognised  no  frontiers,3  for  only  through  "  liberty "  could  the 
"  good  price "  be  secured.  The  "  good  price "  meant  the  highest 
price  and  not  the  lowest,  dearth  and  not  cheapness.  "  Free 
competition  with  foreign  merchants  can  alone  secure  the  best 
possible  price,  and  only  the  highest  price  will  enable  us  to  increase 
our  stock  of  wealth  and  to  maintain  our  population  by  agriculture." 3 
This  is  the  language  of  agriculturists  rather  than  of  Free  Traders. 

1  Enforcing  sales  in  open  market  and  in  limited  quantities  only,  keeping 
corn  beyond  two  years,  etc.     Corn  was  to  be  supplied  to  consumers  in  the  first 
place,  then  to  bakers,  and  finally  to  merchants,  etc. 

2  "  Let  entire  freedom  of  commerce  be  maintained,  for  the  surest,  the  exactest, 
the  most  profitable  regulator  both  of  home  and  of  foreign  trade  for  the  nation 
as  well  as  for  the  State  is  perfect  freedom  of  competition."     (Quosnay's  Maximes, 
xxv.)     "  "We  must  tell  them  that  free  trade  is  in  accordance  with  the  order  and 
with  the  demands   of  justice,   and  everything  that  conforms   to   the   order 
bears  its  own  reward."     (Le  Trosne,  p.  586.) 

s  Dialogues,  p.  153.  The  dearth  of  plenty,  as  they  paradoxically  put  it, 
stimulates  production,  and  Boisguillebert,  in  an  equal  paradox,  remarks  that 
"  Low  price  gives  rise  to  want."  In  the  Maximes,  p.  98,  Quesnay  contents 
himself  by  saying  that  free  trade  in  corn  makes  the  price  more  equal.  "  It  is 
clear,"  he  adds,  "  that,  leaving  aside  the  question  of  foreign  debt,  equal  prices 
will  increase  the  revenue  yielded  by  the  land,  which  will  again  result  in  extended 
cultivation,  which  will  provide  a  guarantee  against  those  dearths  that  decimate 
population." 

Mercier  de  la  Riviere  writes  in  a  similar  vein.     "  A  good  oonstant  average 


30  THE  PHYSIOCRATS 

It  is  the  natural  result  of  thinking  about  agricultural  problems, 
and  especially  about  the  question  of  raising  corn ;  and  since  Free 
Trade  at  this  time  gave  rise  to  no  fears  on  the  score  of  importation, 
free  exchange  meant  free  exportation.  Oncken  points  out  that  the 
commercial  rSgime  which  the  Physiocrats  advocated  was  identical 
with  that  in  operation  in  England  about  this  time,  where  in  case 
of  over-abundance  exportation  was  encouraged  in  order  to  keep 
up  the  price,  and  in  case  of  dearth  importation  was  permitted  in 
order  to  ensure  a  steady  supply  and  to  prevent  the  price  rising 
too  much.1 

In  a  word,  Free  Trade  meant  for  the  Physiocrats  the  total  aboli- 
tion of  all  those  measures  which  found  so  much  favour  with  the  Mer- 
cantilists, and  which  aimed  at  preventing  exportation  to  places  out- 
side the  country  and  checking  the  growth  of  free  intercourse  within 
it.2  Narrow  as  their  conception  of  Free  Trade  at  first  was,  it  was  not 
long  in  growing  out  of  the  straitened  circumstances  which  gave  it 
birth,  and  it  developed  gradually  into  the  Free  Trade  doctrine  as  we 
know  it,  which  Walras  expressed  as  follows  :  "  Free  competition 
secures  for  every  one  the  maximum  final  utility,  or,  what  comes  to 
the  same  thing,  gives  the  maximum  satisfaction."  We  no  longer 
admit  that  international  trade  is  a  mere  pis  aller.  But  all  the  argu- 
ments which  have  been  used  in  its  defence  on  the  Free  Trade  side  were 

price  ensures  abundance,  but  without  freedom  we  Lave  neither  a  good  price  noi 
plenty."  (P.  570.) 

Turgot  in  his  Lettres  sur  le  Commerce  lea  Gratis  develops  the  argument  at  great 
length  and  tries  to  give  a  mathematical  demonstration  of  it.  There  was  no  need  for 
this.  It  is  a  commonplace  of  psychology  that  a  steady  price  of  20  is  preferable 
to  alternative  prices  of  35  and  5  francs  respectively,  although  the  average  in  both 
cases  is  the  same. 

1  It  is  worth  noting  that  the  nature  of  American  competition  was  clearly 
foreseen  by  Quesnay — one  of  the  most  remarkable  instances  of  scientific  prevision 
on  record.  In  bis  article  on  corn  in  the  Encyclopedic  he  says  that  he  views 
the  fertility  of  the  American  colonies  with  apprehension  and  dreads  the  growth 
of  agriculture  in  the  New  World,  but  the  fear  is  provisionally  dismissed  because 
the  corn  is  inferior  in  quality  to  that  of  France  and  is  damaged  in  transit.  (See  our 
remarks  concerning  the  Physiocratic  connection  with  modern  Protectionist 
theories.) 

1  It  must  not  bo  forgotten  that  the  Protectionist  system  aided  the  develop- 
ment of  industry  and  retarded  that  of  agriculture  by  its  policy  of  encouraging 
the  exportation  of  manufactured  products  and  its  restrictions  on  the  exportation 
of  agricultural  products  and  raw  materials  with  a  view  to  securing  cheap  labour 
and  a  plentiful  supply  of  raw  materials  for  the  manufacturing  industries.  The 
Protectionists  were  not  concerned  to  prevent  the  exportation  of  corn.  Both 
Colbertism  and  Mercantilism  sacrificed  the  cultivator  by  preventing  the  expor- 
tation of  corn  and  by  allowing  of  its  importation,  while  doing  the  exact 
opposite  for  manufactured  products. 


TRADE  31 

first  formulated  by  the  Physiocrats.  We  shall  refer  to  a  few  of 
them. 

The  fallacy  lurking  behind  the  "  balance  of  trade  "  theory  is 
exposed  with  great  neatness  by  Mercier  de  la  Rivi&re.  "  I  wiJl 
drown  the  clamour  of  all  your  blind  and  stupid  policies.  Suppose 
that  I  gave  you  all  the  money  which  circulates  among  the  nations 
with  whom  you  trade.  Imagine  it  all  in  your  possession.  What 
would  you  do  with  it  ?  "  He  goes  on  to  show  how  not  a  single 
foreign  country  will  any  longer  be  able  to  buy,  and  consequently 
all  exportation  will  cease.  The  result  of  this  excessive  dearness 
will  be  that  buying  from  foreign  countries  will  be  resorted  to,  and 
this  will  result  in  the  exportation  of  metallic  currency,  which  will 
soon  readjust  matters.1 

The  contention  that  import  duties  are  paid  by  the  foreigner 
is  also  refuted.  Nothing  will  be  sold  by  the  foreigner  at  a  lower 
price  than  that  which  other  nations  would  be  willing  to  give  him. 
An  import  duty  on  such  goods  will  increase  the  real  price,  which  the 
foreigner  will  demand,  and  this  import  duty  will  be  paid  by  those 
who  buy  the  goods.2 

There  is  also  a'  refutation  of  the  policy  known  as  reciprocity. 
"A  nation  levies  an  import  duty  upon  the  goods  of  another  nation, 
but  it  forgets  that  in  trying  to  injure  the  selling  nation  it  is  really 
checking  the  possible  consumption  of  its  own  goods.  This  indirect 
effect,  of  course,  is  inevitable,  but  can  nothing  be  done  to  remedy 
this  by  means  of  reprisals  ?  England  levies  a  heavy  duty  on  French 
wines,  thereby  reducing  its  debit  account  with  France  very  con- 
siderably, but  more  French  wine  will  not  be  bought  if  a  tax  is  also 
placed  upon  the  goods  which  England  exports  to  France.  Do 
you  think  that  the  prejudice  which  England  has  taken  against 
France  can  be  remedied  in  this  way  ?  " 

We  have  multiplied  instances,  for  during  the  whole  of  the  hundred 
years  which  have  since  elapsed  has  anyone  deduced  better  arguments  ? 

These  theories  immediately  received  legal  sanction  in  the  edicts 
of  1763  and  1766  establishing  free  trade  in  corn,  first  within 

1  "  Upon  final  analysis  do  you  find  that  you  have  gained  anything  by  your 
policy  of  always  selling  to  foreigners  without  ever  buying  from  them  ?  Have  you 
gained  any  money  by  the  process  ?  But  you  cannot  retain  it.  It  has  passe  d 
through  your  hands  without  being  of  the  least  use.  The  more  it  increases  the 
more  does  its  value  diminish,  while  the  value  of  other  things  increases  propor- 
tionally." (Mercier  de  la  Riviere,  pp.  580-583.) 

1  Turgot,  (Euvres,  vol.  i,  p.  181.  "If  you  succeed  in  keeping  back  foreign 
merchants  by  means  of  your  protective  tariffs  they  will  not  bring  you  those 
goods  which  you  need,  thus  causing  th:  se  impositions  which  were  designed  foi 
others  to  retaliate  upon  your  own  head."  (Quesnay,  Dialogues.) 


32  THE  PHYSIOCRATS 

the  country  and  then  without,  but  some  very  serious  restrictions 
were  still  retained.  Unfortunately  Nature  proved  very  ungrateful  to 
her  friends.  For  four  or  five  years  she  ran  riot  with  a  series  of  bad 
harvests,  for  which,  as  we  may  well  imagine,  the  Physiocratic  regime 
and  its  inspirers  were  held  responsible.  Despite  the  protests  of  the 
Physiocrats,  this  liberal  act  was  repealed  in  1770.  It  was  re-estab- 
lished by  Turgot  in  1774,  and  again  repealed  by  Necker  in  1777 — a 
variety  of  fortune  that  betokens  a  fickleness  of  public  opinion. 

This  new  piece  of  legislation,  and,  indeed,  the  whole  Physiocratic 
theory,  was  subjected  to  severe  criticism  by  an  abbot  of  the  name 
of  Galiani.  Galiani  was  a  Neapolitan  monsignor  residing  at  the 
French  court.  At  the  age  of  twenty-four  he  had  written  a  remarkable 
work  in  Italian  dealing  with  money,  and  in  1770,  written  in  splendid 
French,  appeared  his  Dialogues  sur  le  Commerce  des  Bles.  It  was 
an  immediate  success,  and  it  won  the  unqualified  approval  of 
Voltaire,  who  was  possibly  attracted  more  by  the  style  than  by  the 
profundity  of  thought.  Galiani  was  not  exactly  opposed  to  laissez- 
faire.  "  Liberty,"  he  wrote,  "  stands  in  no  need  of  defence  so  long 
as  it  is  at  all  possible.  Whenever  we  can  we  ought  to  be  on  the  side 
of  liberty."  l  But  he  is  opposed  to  general  systems  and  against 
complete  self -surrender  into  the  hands  of  Nature.  "Nature," 
says  he,  "  is  too  vast  to  be  concerned  about  our  petty  trifles."  ' 
He  shares  the  realistic  or  historical  views  of  the  writers  of  to-day, 
and  thinks  that  before  applying  the  principles  of  political  economy 
some  account  should  be  taken  of  time,  place,  and  circumstances. 
"  The  state  of  which  the  Physiocrats  speak — what  is  it  ?  Where 
is  it  to  be  found."  8 

Along  with  Galiani  we  must  mention  the  great  financier  Necker, 
who  in  a  bulky  volume  entitled  La  Legislation  et  le  Commerce  des 
Grains  (1775)  advocates  opportunistic  views  almost  identical  in 
character  with  those  of  Galiani,  and  who,  as  Minister  of  State 
(1776-81  and  1788-90),  put  an  end  to  free  trade  in  corn. 

In  monetary  matters,  especially  on  the  question  of  interest,  the 
Physiocrats  were  willing  to  recognize  an  exception  to  their  principle 
of  non-intervention.  Mirabeau  thought  that  whenever  a  real  in- 
crease of  wealth  resulted  from  the  use  of  capital,  as  in  agriculture, 
the  payment  of  interest  was  only  just.  It  was  simply  a  sign  or 
symbol  of  the  net  product.  But  in  trade  matters  he  thought  it 

1  Dialogues,  pp.  254,  274.  '  Ibid.,  p.  237. 

*  Ibid.,  p.  22.  He  proposed  a  highly  complicated  system  imposing  moderate 
duties  both  upon  the  importation  and  exportation  of  corn — a  6  psr  cent,  ad 
valorem  duty  in  the  one  case  and  a  10  per  cent,  in  the  other. 


THE  FUNCTIONS  OF  THE  STATE  33 

best  to  limit  if  not  to  prohibit  it  altogether.  It  often  proved  very 
harmful,  and  frequently  was  nothing  better  than  a  tax  levied  by 
order  of  "  the  corrosive  landowners."  Quesnay  could  not  justify  it 
except  in  those  cases  where  it  yielded  a  net  product,  but  he  was 
content  simply  to  suggest  a  limitation  of  it.  The  Physiocrats  are  at 
least  logical.  If  capital  sunk  in  industrial  and  commercial  under- 
takings yields  no  income  it  is  evident  that  the  interest  must  be  taken 
from  the  borrower's  pocket,  and  they  condemned  it  just  as  they 
condemned  taxing  the  industrial  and  commercial  classes. 

Turgot 1  is  the  only  one  of  them  who  frankly  justifies  taking 
interest.  The  reason  that  he  gives  is  not  the  usual  Physiocratic 
argument,  but  rather  that  the  owner  of  capital  may  either  invest  it 
in  the  land  or  undertake  some  other  productive  work — capital  being 
the  indispensable  basis  of  all  enterprise  2  —  and  that,  consequently,  the 
capital  will  never  be  given  to  anyone  who  will  offer  less  than  what 
might  have  been  made  out  of  it  did  the  owner  himself  employ  it. 
This  argument  implies  that  every  undertaking  is  essentially  a  pro- 
ductive one,  and  indeed  one  of  the  traits  which  distinguishes  Turgot 
from  the  other  Physiocrats  is  the  fact  that  he  did  not  think  that 
industry  and  commerce  were  entirely  unproductive. 

II :  THE  FUNCTIONS  OF  THE  STATE 

SEEING  that  the  Physiocrats  believed  that  human  society  was  pervaded 
by  the  principle  of  "  natural  order,"  which  required  no  adventitious 
aid  from  any  written  law,  and  since  Nature's  voice,  without  any 
artificial  restraint,  was  sufficient  guide  for  mankind,  it  might  have  been 
expected  that  the  trend  of  Physiocracy  would  have  been  toward 
the  negation  of  all  legislation,  of  all  authority — in  a  word,  toward  the 
subversion  of  the  State. 

It  is  certain  that  the  Physiocrats  wished  to  reduce  legislative 
activity  to  a  minimum,  and  they  expressed  the  belief — which  has 
often  been  repeated  since  by  every  advocate  of  laissez-faire — 
that  the  most  useful  work  any  legislative  body  can  do  is  to  abolish 
useless  laws.8  If  any  new  laws  are  required  they  ought  simply  to  be 
copies  of  the  unwritten  laws  of  Nature.  Neither  men  nor  Govern- 

1  Turgot  was  the  author  of  a  work  on  this  subject,  entitled  Memoire  sur  let 
Pr&ts  d"  Argent  (1769). 

1  Reflexions  sur  la  Formation  des  Richesses,  §§  lix,  Ixi,  Ixxiv. 

1  "Remove  all  useless,  unjust,  contradictory,  and  absurd  laws,  and  there  will 
not  be  much  legislative  machinery  left  after  that."  (Baudeau,  p.  817.)  "It  is 
not  a  question  of  procuring  immense  riches,  but  simply  a  question  of  letting 
people  alone,  a  problem  that  hardly  requires  a  moment's  thought."  So  wrote 
Boisguillebert  sixty  years  before. 


34  THE  PHYSIOCRATS 

merits  can  make  laws,  for  they  have  not  the  necessary  ability.  Every 
law  should  be  an  expression  of  that  Divine  wisdom  which  rules 
the  universe.  Hence  the  true  title  of  lawgiver,  not  law-maker.1 
It  is  in  this  connexion  that  we  meet  with  those  anecdotes — 
some  of  more  than  doubtful  authenticity  it  is  true — that  have 
gathered  round  their  names.  Of  these  the  best  known  is  that  which 
tells  of  Mercier  de  la  Riviere's  visit  to  St.  Petersburg,  and  his 
laconic  reply  to  Catherine  the  Great.  He  had  been  invited  there 
to  advise  the  Empress  about  a  new  constitution  for  the  country. 
After  dilating  upon  the  great  difficulties  of  the  undertaking  and  the 
responsibilities  it  involved,  he  gave  it  as  his  opinion  that  the  best  way 
of  achieving  her  object  was  just  to  let  things  take  their  course. 
Whereupon  the  Empress  promptly  wished  him  good-bye. 

But  it  would  be  a  great  mistake  to  think  of  the  Physiocrats  as 
anarchists.  What  they  wanted  to  see  was  the  minimum  of  legislation 
with  a  maximum  of  authority.  The  two  things  are  by  no  means  in- 
compatible. The  liberal  policy  of  limitation  and  control  would  have 
found  scant  favour  with  them.  Their  ideal  was  neither  democratic 
self-government,  as  we  have  it  in  the  Greek  republics,  nor  a  parlia- 
mentary regime  such  as  we  find  in  England.  Both  were  detested.2 

1  Quesnay,  Maximes,  vol.  i,  p.  390.  Mercier  de  la  Riviere  writes  in  much  the 
same  style ;  "  The  positive  laws  that  are  already  in  existence  are  merely  expres- 
sions of  such  natural  rights."  (VoL  ii,  p.  61.)  It  sounds  like  a  preamble  to  the 
Declaration  of  the  Rights  of  Man. 

*  "  The  Physiocrats  had  the  most  absolute  contempt  for  political  liberty." 
(Esmein,  La  Science  politique  des  Physiocrates,  address  at  the  opening  session  of 
the  Congress  of  Learned  Societies,  Paris,  1906.) 

"  The  Greek  republics  never  became  acquainted  with  the  laws  of  the  order. 
Those  restless,  usurping,  tyrannical  tribes  never  ceased  to  drench  the  plains  with 
human  blood,  to  cover  with  ruins  and  to  reduce  to  waste  the  most  fertile  and 
the  best  situated  soil  in  the  then  known  world."  (Baudeau,  p.  800.) 

"  It  is  evident  that  a  democratic  sovereign — i.e.  the  whole  people — cannot  itself 
exercise  its  authority,  and  must  be  content  to  name  representatives.  These 
representatives  are  merely  agents,  whose  functions  are  naturally  transitory,  and 
such  temporary  agents  cannot  always  be  in  complete  harmony  with  every  interest 
within  the  nation.  This  is  not  the  kind  of  administration  contemplated  by 
the  Physiocrats.  The  sovereignty  of  the  natural  order  is  neither  elective 
nor  aristocratic.  Only  in  the  case  of  hereditary  monarchy  can  all  interests, 
both  personal  and  individual,  present  and  future,  be  clearly  linked  with  those  of 
the  nation,  by  their  copartnership  in  all  the  net  products  of  the  territory  sub- 
mitted to  their  care."  (Dupont,  vol.  i,  pp.  359-360.) 

This  sounds  very  much  like  a  eulogy  of  the  House  of  Hohenzollern,  delivered 
by  William  IL 

Very  curious  also  are  Dupont's  criticises  of  the  parliamentary  regime.  In 
his  letter  to  J.  B.  Say  (p.  414)  he  notes  "  its  tendency  to  corruption  and  canker," 
which  had  not  then  manifested  itself  in  the  United  States  of  America.  These 
letters,  though  very  interesting,  hardly  belong  to  a  history  of  economic  doctrines. 


THE  FUNCTIONS  OF  THE  STATE  35 

On  the  other  hand,  great  respect  was  shown  for  the  social  hierarchy? 
and  they  were  strong  in  their  condemnation  of  every  doctrine  that 
aimed  at  attacking  either  the  throne  or  the  nobility.  What  they 
desired  was  to  have  sovereign  authority  in  the  guise  of  a  hereditary 
monarchy.  In  short,  what  they  really  wanted — and  they  were  not 
frightened  by  the  name — was  despotism.1 

"The  sovereign  authority  should  be  one,  and  supreme  above 
all  individual  or  private  enterprise.  The  object  of  sovereignty 
is  to  secure  obedience,  to  defend  every  just  right,  on  the  one 
hand,  and  to  secure  personal  security  on  the  other.  A  govern- 
ment that  is  based  upon  the  idea  of  a  balance  of  power  is  use- 
less."2 

This  should  help  us  to  realise  the  distance  separating  the  Physio- 
crats from  the  Montesquieuian  idea  of  the  distribution  of  the  sovereign 
authority,  and  from  the  other  idea  of  local  or  regional  control. 
There  is  no  mention  of  representation  as  a  corollary  of  taxation. 
This  form  of  guarantee,  which  marks  the  beginnings  of  parliamentary 
government,  could  have  no  real  significance  for  the  Physiocrats. 
Taxation  was  just  a  right  inherent  in  the  conception  of  proprietary 
sovereignty,  a  territorial  revenue,  which  was  in  no  way  dependent 
upon  the  people's  will. 

It  seems  strange  that  such  should  be  the  opinion  of  a  future 
President  of  the  Constituent  Assembly.  How  can  we  explain  this 
apparent  contradiction  and  such  love  of  despotism  among  the 
apostles  of  laissez-faire  ? 

Despotism,  in  the  eyes  of  the  Physiocrats,  had  a  peculiar  signi- 
ficance of  its  own.  It  was  the  work  of  freedom,  not  of  bondage.  It 
did  not  signify  the  rule  of  the  benevolent  despot,  prepared  to  make 
men  happy,  even  against  their  own  will.  It  was  just  the  sovereignty 
of  the  "  natural  order  "  3 — nothing  more.  Every  reasonable  person 

1  "  It  is  only  when  the  people  are  ingenuous  that  we  find  real  despots, 
because  then  the  sovereign  can  do  whatever  ho  wills."  (Dupont,  p.  384.) 

1  Quesnay,  Maximes,  i.  The  Physiocrats  were  in  favour  of  a  national 
assembly,  but  would  give  it  no  legislative  power.  It  was  to  be  just  a  council  of 
State  concerned  chiefly  with  public  works  and  with  the  apportionment  of  the 
burden  of  taxation.  See  M.  Esmein's  memoire  on  the  proposed  National  Assembly 
of  the  Physiocrats  (Camples  rendus  de  V  Academic  des  Sciences  Morales  et  Politiques, 
1904). 

•  "  The  personal  despotism  will  only  bo  the  legal  despotism  of  an  obvious 
and  essential  order.  In  legal  despotism  the  obviousness  of  a  law  demands 
obedience  before  the  monarch  enjoins  it.  Euclid  is  a  veritable  despot,  and  the 
geometrical  truths  that  he  enunciates  are  really  despotic  laws.  The  legal  and 
personal  despotism  of  the  legislator  are  one  and  the  same.  Together  they  are 
irresistible,"  (Mercier  de  la  Riviere,  pp.  460-471.)  This  despotism  is  really  not 


36  THE  PHYSIOCRATS 

felt  himself  bound  to  obey  it,  and  realised  that  only  through  such 
obedience  could  the  truth  be  possibly  known. 

It  is  quite  different  from  the  despotism  of  the  ancient  maxim, 
Sicut  principi  placuit  legis  habet  vigorem.1  They  would  never  have 
subscribed  to  the  doctrine  that  the  king's  word  is  law,  but  they 
were  equally  energetic  in  rejecting  the  claim  of  the  popular  will.2 
They  are  as  far  from  modern  democracy  as  they  are  from  monarchical 
absolutism. 

This  despotism  was  incarnate  in  the  person  of  the  sovereign  or 
king.  But  he  is  simply  an  organ  for  the  transmission  of  those 
higher  laws  which  are  given  to  him.  They  would  compare  him 
with  the  leader  of  an  orchestra,  his  sceptre  being  the  baton  that  keeps 
time.  The  conductor's  despotism  is  greater  than  the  Tsar's,  for 
every  musician  has  to  obey  the  movement  of  the  hand,  and  that 
immediately.  But  this  is  not  tyranny,  and  whoever  strikes  a  false 
note  in  a  spirit  of  revenge  is  not  simply  a  revolter,  but  also  an 
idiot. 

Sovereignty  appealed  to  the  Physiocrats  in  the  guise  of  heredi- 
tary monarchy,  because  of  its  associations  with  property  under  the 
feudal  regime,  and  since  hereditary  rights  were  connected  with  landed 
property  so  must  royalty  be.  The  sovereign  who  best  represents 
the  Physiocratic  ideal  is  perhaps  the  Emperor  of  China.3  As  the 
Son  of  Heaven  he  represents  the  "  natural  order,"  which  is  also  the 
**  divine  order."  As  an  agricultural  monarch  he  solemnly  puts  his 
hand  to  the  plough  once  a  year.  His  people  really  govern  them- 
selves ;  that  is,  he  rules  them  according  to  custom  and  the  practice 
of  sacred  rites.4 

unlike  that  of  Comte,  who  remarks  that  there  is  no  question  of  liberty  of  con- 
science in  geometry. 

1  "  On  the  contrary,"  says  Quesnay  in  a  letter  to  Mirabeau,  "  this  despotism 
is  a  sufficient  guarantee  against  the  abuse  of  power." 

1  "That  is  an  abominable  absurdity,  "says  Baudeau,  '  for  on  this  reckoning  a 
mere  majority  vote  would  be  sufficient  to  justify  parricide." 

Is  it  necessary  to  point  out  that  this  is  exactly  the  reverse  of  the  view  held 
by  interventionists  and  socialists  of  these  later  times,  who  think  that  the  mission 
of  the  State  is  to  redress  the  grievances  caused  by  natural  laws  ? 

8  "  This  single  supreme  will  which  exercises  supreme  power  is  not,  strictly 
speaking,  a  human  will  at  all.  It  is  just  the  voice  of  nature — the  will  of  God. 
The  Chinese  are  the  only  people  whose  philosophy  seems  to  have  got  hold  of  this 
supreme  truth,  and  they  regard  their  emperor  as  the  eldest  son  of  God."  (Baudeau, 
p.  798.) 

*  Some  writers — for  example,  Pantaleoni  in  his  introduction  to  Arthur 
Labriola's  book,Le  Dottrine  economiche  di  Quesnay — seem  to  think  that  the  Physio- 
cratic criticism  proved  fatal  to  feudal  society,  just  as  the  socialistic  criticism  of 
the  present  time  is  undermining  the  bourgeois  society.  Politically  this  is  true 


THE  FUNCTIONS  OF  THE  STATE       37 

In  practice  there  will  be  nothing  of  great  importance  for  the 
despot  to  do.  "  As  kings  and  governors  you  will  find  how  easy  it  is 
to  exercise  your  sacred  functions,  which  simply  consist  in  not 
interfering  with  the  good  that  is  already  being  done,  and  in  punish- 
ing those  few  persons  who  occasionally  attack  private  property."  l 
In  short,  the  preservation  of  the  "  natural  order  "  and  the  defending 
of  its  basis — private  property — against  the  attacks  of  the  ignorant 
and  the  sacrilegious  is  the  first  and  most  important  duty  of  the 
sovereign.  "No  order  of  any  kind  is  possible  in  society  unless  the 
right  of  possession  is  guaranteed  to  the  members  of  that  society 
by  the  force  of  a  sovereign  authority."  a 

Instruction  is  the  second  duty  upon  which  the  Physiocrats  lay 
special  stress.  "  Universal  education,"  says  Baudeau,  "  is  the  first 
and  only  social  tie."  Quesnay  is  specially  anxious  for  instruction  on 
the  "natural  order,"  and  the  means  of  becoming  acquainted  with  it. 
Further,  the  only  guarantee  against  personal  despotism  lies  in  well- 
diffused  instruction  and  an  educated  public  opinion.  If  public 
opinion,  as  Quesnay  said,  is  to  lead,  it  should  be  enlightened. 

Public  works  are  also  mentioned.  A  wise  landlord  has  good 
roads  on  his  property,  for  good  roads  and  canals  improve  it.  These 
represent  a  species  of  avances  foncieres,  similar  to  those  undertaken 
by  proprietors. 

This  is  by  no  means  all.3  There  are  a  number  of  duties  recognised 
as  belonging  to  the  State,  of  which  every  economist  of  the  Liberal 
school  up  to  Bastiat  and  M.  de  Molinari  approves. 

We  will  add  one  other  trait.  Like  the  Liberal  school,  the  Physio- 
crats were  whole-hearted  "  internationalists."  In  this  respect  they 
differ  from  their  prototypes,  the  Chinese.  They  believed  that  all 
class  distinctions  and  all  international  barriers  ought  to  be  removed 
in  the  interest  of  political  development,  as  well  as  in  that  of  scientific 
study.*  The  peace  advocates  of  to-day  would  do  well  to  make  the 
acquaintance  of  their  illustrious  predecessors. 

enough,  for  the  Physiocrats  advocated  the  establishment  of  a  single  supreme 
monarch  with  undivided  authority.     Economically   it  is  incorrect,  for   their 
conception  even  of  sovereignty  and  taxation  is  impregnated  with  feudal  ideas. 
1  Dupont,  Discours  en  tete  dei  (Euvres  de  Quesnay,  vol,  i,  p.  35. 

•  Ibid.  p.  22. 

•  Turgot,  who  is  less  inclined  to  favour  agriculture,  thinks  that  certain  royal 
privileges  must  be  granted  before  manufacturers  can  compete  with  agriculture 
((Euvres,  vol.  i,  p.  360). 

4  "  One  has  come  to  regard  the  various  nations  as  drawn  up  against  one 
another  in  a  perpetual  state  of  war.  This  unfortunate  prejudice  is  almost  sacred, 
and  is  regarded  as  a  patriotic  virtue."  (Baudeau,  p.  808.) 

The  three  errors  usually  committed  by  States,  and  the  three  that  led  to  the 


38  THE  PHYSIOCRATS 

III:  TAXATION 

THE  bulk  of  the  Physiocratic  system  is  taken  up  with  the  exposition 
of  a  theory  of  taxation,  which  really  forms  one  of  the  most  charac- 
teristic portions  of  their  work.  Though  inextricably  bound  up  with 
the  theory  of  the  net  product  and  with  the  conception  of  landed 
proprietorship,  curiously  enough,  it  has  survived  the  rest  of  their 
doctrine,  and  quite  recently  has  been  given  a  new  lease  of  life. 

In  the  table  showing  the  distribution  of  the  national  income  three 
participators  only  are  mentioned — the  landed  proprietor,  the  farmer, 
and  the  artisan.  But  there  is  also  a  fourth. — the  Physiocratic 
sovereign,  who  is  none  other  than  the  State  itself,  and  who  thoroughly 
deserves  a  share.  This  benevolent  despot,  whose  duties  we  have 
just  mentioned,  cannot  be  very  exacting,  for,  having  little  to  do,  his 
demands  must  be  moderate.  In  addition  to  his  double  mission  of 
maintaining  security  and  giving  instruction,  he  must  also  contribute 
towards  increasing  the  productivity  of  the  land  by  establishing  public 
works,  making  roads,  etc.1  Money  is  required  for  all  this,  and  the 
Physiocrats  argued  that  taxes  ought  to  be  paid  liberally,2  and  not 
grudgingly,  as  is  too  often  the  case  under  a  parliamentary  rtgime. 
Where  is  this  money  to  come  from  ? 

The  reply  is  obvious  if  we  have  grasped  their  system.  The  only 
available  fund  is  the  net  product,  which  is  the  only  new  wealth 
that  is  really  dispensable — the  rest  is  necessarily  absorbed  in  the 
repayment  of  the  advances  made  for  the  upkeep  of  the  agricultural 
and  industrial  classes.  Were  taxation  to  absorb  a  proportion  of  the 
revenues  that  are  devoted  to  production  it  would  gradually  drain 
away  the  source  of  all  wealth.  So  long  as  it  only  takes  the  surplus — 
the  true  net  product,  which  is  a  mere  tributary  of  the  main  stream 
— no  harm  will  be  done  to  future  production. 

All  this  is  quite  clear.     But  if  taxation  is  to  absorb  the  net 

downfall  of  Greece,  Baudeau  thought,  were  arbitrary  use  of  legislative  authority, 
oppressive  taxation,  and  aggressive  patriotism  (p.  801). 

1  "  Before  a  harvest  can  be  reaped  not  only  must  the  cultivators  incur  the 
usual  outlay  upon  stock,  etc.,  and  the  proprietors  upon  clearing  the  land,  but  the 
public  authoritymust  also  incur  some  expense, which  might  be  designated  avarices 
souveraine&,"    (Baudeau,  p.  758.) 

2  '*  The  Government  ought  to  be  less  concerned  with  the  task  of  saving  than 
with  the  duty  of  spending  upon  those  operations  that  are  necessary  for  the 
prosperity  of  the  realm.     This  heavy  expenditure  will  cease  when  the  country 
has  become  wealthy."     (Quesnay,  Maximes,  xxvi.J 

"  It  is  a  narrow  and  churlish  English  idea  which  decrees  that  an  annual  sum 
should  be  annually  voted  to  the  Government,  and  that  Parliament  should  reserve 
to  itself  the  right  of  refusing  this  tax.  Such  a  procedure  is  a  travesty  of  demo- 
cracy." (Dupont,  in  a  letter  to  J.  B.  Say.) 


TAXATION  39 

product  the  question  arises  as  to  who  is  to  pay  it.  It  is  equally 
evident  that  it  can  only  be  taken  from  those  who  already  possess  it, 
namely,  from  the  landed  proprietors,  who  must  bear  the  whole 
burden  of  taxation.  Just  now  we  were  amazed  at  the  privileges  which 
the  Physiocrats  so  light-heartedly  granted  them  :  this  is  the  ransom, 
and  it  is  no  light  one.  The  next  problem  is  how  to  assess  this  tax. 

The  Physiocrats  were  extremely  loth  to  rob  the  gentry  of  their 
incomes,  and  a  number  of  pages  in  their  writings  are  devoted  to  a 
justification  of  their  claims  upon  them.  Not  only  were  they  willing  to 
leave  them  everything  that  was  necessary  to  compensate  them  for.the 
outlay  of  capital  and  labour,  but  also  all  that  might  be  required  to 
make  the  property  thoroughly  valuable  and  the  position  of  the  land- 
owner a  most  enviable  one.1  The  preference  shown  for  the  landowner 
is  just  the  result  of  the  social  importance  attributed  to  him  by  the 
Physiocrats.  "  If  some  other  class  were  preferable,"  says  Dupont  de 
Nemours,  **  people  would  turn  their  attention  to  that."  They 
would  no  longer  spend  their  capital  in  clearing  or  improving  the 
land.  But  if  the  possession  of  land  be  so  desirable,  is  there  not  some 
danger  lest  everybody  should  become  a  landlord  and  neglect  the 
other  walks  of  life  ?  The  Physiocrats  thought  not,  for,  since  Nature 
has  set  a  limit  to  the  amount  of  land  in  existence,  there  must  also 
be  a  limit  to  the  number  of  landowners. 

A  third  of  the  net  product,  or,  if  we  accept  Baudeau's  figures, 
six-twentieths,  i.e.  30  per  cent.,  was  to  be  paid  in  taxes.  Taking  the 
net  product  at  2  milliard  francs,  which  is  the  figure  given  in  the 
Explication  du  Tableau  Iconomique,  this  gives  us  exactly  600  million 
francs  as  the  amount  of  the  tax.2 

The  proprietors,  who  were  then  for  the  most  part  free  from 
taxation,  felt  that  this  was  a  very  considerable  contribution,  and  that 
the  Physiocrats  demanded  a  heavy  price  for  the  high  honour  which 

1  "  The  amount  of  the  tax  as  compared  with  the  amount  of  the  net  product 
should  be  such  that  the  position  of  the  landed  proprietor  shall  be  the  best 
possible  and  the  state  of  being  a  landowner  preferable  to  any  other  state  in 
society."  (Dupont,  p.  356.) 

1  If  we  compare  this  figure  with  the  total  gross  revenue  of  France,  valued  then  at 
5  milliard  francs,  it  would  represent  a  tax  of  12  per  cent.,  which  is  rather  heavy 
for  a  State  that  was  supposed  to  I  e  governed  by  the  laws  of  the  "  natural  order." 
The  proportion  which  the  present  French  Budget  bears  to  the  total  revenue  of 
the  country  is  16  per  cent. 

The  French  Budget  of  1781,  introduced  by  Necker,  corresponded  almost 
exactly  with  the  figure  given  by  the  Physiocrats,  namely,  610  millions.  Of 
course,  we  ought  to  add  to  this  the  ecclesiastical  dues,  the  seigniorial  rights,  and 
the  compulsory  labour  of  every  kind,  which  were  to  disappear  under  the  Phytiio- 
cratic  rtgimt. 


40  THE  PHYSIOCRATS 

they  had  conferred  upon  them.  Even  to-day  a  tax  of  30  per  cent, 
on  the  gross  revenue  of  landlords  would  cause  some  consternation. 
The  Physiocrats  anticipated  this  objection,  and  .in  reply  brought 
forward  an  argument  which  shows  that  they  possessed  exceptionally 
keen  economic  insight.  They  argued  that  none  would  feel  the 
burden,  seeing  that  no  one  was  really  paying  it.  Land  would  now  be 
bought  at  70  per  cent,  of  its  former  value,  so  that  the  30  per  cent, 
nominally  paid  by  the  proprietor  was  in  reality  not  paid  by  him 
at  all.1  Land  let  at  £10,000  would  be  valued  at  £200,000.  But 
with  a  tax  of  £3000  it  is  really  only  yielding  £7000,  and  its  value  will 
be  £140,000.  The  buyer  who  pays  this  price,  despite  the  fact  that 
he  has  paid  a  tax  of  £3000,  will  enjoy  all  the  revenue  to  which  he  has 
any  claim,  for  he  can  only  lay  claim  to  what  he  has  paid  for,  and  he 
did  not  pay  for  that  portion  of  the  revenue  which  is  affected  by  the 
tax.  It  is  exactly  as  if  he  had  only  bought  seven-tenths  of  the 
land,  the  remaining  three-tenths  being  the  State's.  And  if  at  some 
later  time  this  tax  should  be  abolished,  it  would  merely  mean 
making  him  a  present  of  £3000  a  year — the  equivalent  of  a  lump 
sum  of  £60,000. a 

The  reasoning  was  excellent  for  those  buying  land  after  the  tax 
had  been  levied.  It  had,  however,  a  much  wider  import  than  the 
Physiocrats  thought,  for  it  might  be  applied  not  merely  to  taxes 
on  land,  but  also  to  taxes  on  capital.  But  this  gave  little  consolation 
to  those  who  were  to  have  the  honour  of  inaugurating  the  new 
regime,  and  the  first  task  evidently  was  to  convert  them.3 

1  "  The  tax  is  a  kind  of  inalienable  common  property.  When  proprietors 
buy  or  sell  land  they  do  not  buy  and  sell  the  tar.  They  can  only  dispose  of 
that  portion  of  the  land  which  really  belongs  to  them,  after  deducting  the  amount 
of  the  tax.  This  tax  is  no  more  a  charge  upon  property  than  is  the  right  of 
fellow  proprietors  a  burden  upon  one's  property.  And  so  the  public  revenue 
is  not  burdensome  to  anyone,  costs  nothing,  and  is  paid  by  no  one.  Hence,  it 
in  no  way  curtails  the  amount  of  property  which  a  person  has."  (Dupont, 
vol.  i,  pp.  357,  358.) 

*  In  order  to  give  every  security  to  proprietors  the  Physiocrats  were  anxious 
that  the  value  of  the  property,  when  once  it  was  fixed,  should  vary  as  little  as 
possible.  Baudeau,  however,  recognised  the  advisability  of  periodical  revalua- 
tions "  in  order  that  the  sovereign  power  should  always  share  in  both  the  profits 
and  the  losses  of  the  producer."  And  he  addresses  this  important  caution  to 
the  proprietors :  "  Take  no  credit  to  yourselves  for  the  increase  in  the  revenue 
of  land.  The  thanks  are  really  due  to  the  growing  efficiency  of  the  sovereign 
authority."  (P.  708.) 

1  "  Let  us  observe,  in  passing,  that  the  terms  '  taxation '  and  '  public  revenue  ' 
have  unfortunately  become  synonymous  in  the  public  mind.  The  term '  taxation '  is 
always  unpopular.  It  implies  a  charge  that  is  hard  to  bear,  and  which  everybody 
is  anxious  to  shirk.  The  public  revenue  is  the  product  of  the  sovereign's  landed 


TAXATION  41 

The  sovereign's  position  in  the  main  is  like  that  of  the  landed 
proprietors,  which  is  in  agreement  with  the  Physiocratic  conception 
of  sovereignty.  The  landed  proprietors  and  the  king  in  reality 
form  one  class  of  fellow  landowners,  with  the  same  rights,  the  same 
duties,  and  the  same  revenues.  Hence  the  sovereign's  interests 
are  completely  bound  up  with  those  of  his  country.1 

The  Physiocrats  attached  the  greatest  practical  importance  to 
their  fiscal  system,  and  were  thoroughly  convinced  that  the  misery  of 
the  people  was  due  to  the  unequal  distribution  of  the  burden  of  taxa- 
tion. They  thought  that  this  was  the  true  source  of  injustice — in 
short,  that  this  was  the  social  problem.  To-day  we  ascribe  misery  to 
unequal  distribution  of  wealth  rather  than  to  any  particular  fiscal 
system,  and  consequently  the  Physiocratic  view  seems  to  us  somewhat 
extreme.  Still,  it  was  perhaps  not  so  difficult  to  justify,  in  view  of 
the  frightful  conditions  of  fiscal  organisation  under  the  old  regime. 

The  objections  which  a  single  tax,  levied  only  on  the  landed 
interest,  was  bound  to  provoke  were  not  unforeseen  by  the  Physiocrats, 
nor  did  they  neglect  to  answer  them. 

To  the  objection  that  it  was  unjust  to  place  the  burden  of  taxation 
upon  the  shoulders  of  a  single  class  of  the  nation,2  instead  of  dis- 
tributing it  equally  among  all  classes,  the  Physiocrats  replied  that 
the  statesman's  ideal  was  not  equal  taxation,  but  the  complete 
abolition  of  all  taxation.  This  could  only  be  achieved  by  taxing 
the  "  net  product." 

Suppose  that  we  agree  that  the  taxes  should  be  paid  by  some 
other  class.  The  question  then  is  to  determine  what  class  of  the 
community  should  be  chosen. 

Shall  we  say  that  the  farmer  must  pay  them  ?  But  after  deduct- 
ing the  "  net  product  "  what  remains  for  the  farmer  is  just  the  bare 
equivalent  of  his  original  outlay.  Consequently,  if  we  take  600 
millions  from  the  farmers  by  way  of  taxation  there  will  be  so  much 
less  capital  for  the  land,  resulting  in  a  smaller  gross  product  the 
following  year,'  unless  they  agitate  for  a  reduction  of  600  millions  in 

property,  which  is  disAnct  from  his  subjects'  property."  (Mercier  de  la  Riviere, 
p.  451.) 

1  "  The  sovereign  takes  a  fixed  amount  of  the  net  product  for  his  annual  income. 
This  amount  of  necessity  grows  with  every  increase  of  the  net  product  and 
diminishes  with  every  shrinking  of  the  product.  The  people's  interests  and  the 
sovereign's  are,  consequently,  necessarily  one."  (Baudeau,  p.  769.) 

1  This  was  the  basis  of  Voltaire's  lively  satire,  VHomme.  avec  Quarante  Ecus. 
It  treats  of  a  wealthy  financier  who  escapes  taxation,  and  who  makes  sport  of 
the  poor  agriculturist  who  pays  taxes  for  both,  although  his  income  is  only 
forty  ecus. 

'•>  "  Such  a  reduction  of  the  necessary  expenditure  must  result  in  diminished 


42  THE  PHYSIOCRATS 

their  rents. ,  If  they  succeed  this  will  leave  the  proprietors  in  the 
position  of  having  paid  over  the  600  millions  to  the  State.  But 
we  must  also  reckon  the  losses  and  friction  incurred  in  every  devia- 
tion from  the  "  natural  order."  Suppose  we  decide  that  the  sterile 
classes  should  pay  the  taxes.  This  class  is  ex  hypothesi  sterile — that 
is,  it  produces  the  exact  equivalent  of  what  it  consumes.  To 
take  600  millions  from  this  class  is  tantamount  to  a  reduction  of 
its  consumption  by  600  millions,  or  an  equivalent  limitation  of  its 
purchases  of  raw  material.  The  result  would  be  a  diminished 
product  in  the  future,  unless  the  industrial  classes  succeeded  in 
increasing  prices  by  an  equivalent  amount.  Even  in  that  case  the 
landed  proprietors  will  have  to  bear  the  brunt  of  it :  firstly,  they 
will  have  to  reduce  their  own  consumption,  and  secondly,  their 
tenants',  whose  efficiency  will  thereby  be  impaired.1 

This  process  of  reasoning  seems  to  imply  that  the  revenues  of 
the  agricultural  and  industrial  classes  are  not  squeezable  because 
they  represent  the  indispensable  minimum  necessary  for  the 
expenses  of  production.  This  seems  to  be  an  anticipation  of  the 
notorious  "  iron  law."  Turgot's  formula  incisively  stating  this  law, 
but  containing  no  attempt  at  a  justification,  is  known  to  most  people.2 
Long  before  his  day,  however,  it  had  been  stated  by  Quesnay  in 
terms  no  less  pronounced,  though  perhaps  not  so  well  known.  "  It 
is  useless  to  urge  that  wage-earners  can  pay  the  tax  so  levied  upon 
them,  by  restricting  consumption  and  depriving  themselves  of 
luxuries  without  thereby  causing  the  burden  to  fall  upon  the  classes 
who  pay  the  wages.  The  rate  of  wages,  and  consequently  the 

production,  because  there  can  be  no  harvest  without  some  amount  of  preliminary 
expense.  You  may  check  your  expenditure,  but  it  will  mean  diminishing  your 
harvest — a  decrease  in  the  one  means  an  equal  decrease  of  the  other.  Such  a 
fatal  blow  to  the  growth  of  population  would,  in  the  long  run,  injure  the 
landed  proprietor  and  the  sovereign."  (Dupont  de  Nemours,  p.  353.) 

"  A  fall  in  the  expenditure  means  a  smaller  harvest,  which  means  that  less 
will  be  expended  upon  making  preparation  for  the  next  harvest.  This  cyclical 
movement  seems  a  terrible  thing  to  those  who  have  given  it  some  thought." 
(Mercier  de  la  Riviere,  p.  499.) 

1  "  There  would  bo  something  to  say  for  this  if  the  rich  repaid  them  by 
increased  wages  or  additional  almsgiving.  But  the  poor  give  to  the  rich,  and  so 
add  to  their  misery,  already  sufficiently  great.  The  State  demands  from  those 
who  have  nothing  to  give,  and  directs  all  its  penalties  and  exercises  all  its  severity 
upon  the  poor."  (Turgot,  (Euvres,  vol  .i,  p.  413). 

"  It  would  be  better  for  the  landed  proprietors  to  pay  it  direct  to  the  Trea- 
sury, and  thus  save  the  cost  of  collection."  (Dupont  de  Nemours,  p.  352.) 

1  "  It  might  happen — arid,  indeed,  it  often  does  happen — that  the  worker's 
wage  is  only  equal  to  what  is  necessary  for  his  subsistence."  (Reflexions,  vi.) 

It  IB  also  possible  that  Jesus  was  not  formulating  a  general  law  when  He  said 


TAXATION  43 

amount  of  comfort  and  luxury  which  wages  can  purchase,  are  fixed 
at  the  irreducible  minimum  by  the  action  of  the  competition  which 
prevails  among  them."  This  is  quite  a  characteristic  trait.1  The 
author  of  the  "  natural  order,"  without  any  hesitation,  admits  that 
the  direct  outcome  of  the  establishment  of  that  order  would  be  to 
reduce  the  life  of  the  wage-earners  to  a  level  of  bare  subsistence. 

It  is  also  remarkable  that  in  their  study  of  the  industrial  classes 
wages  should  have  claimed  the  exclusive  attention  of  the  Physiocrats. 
Profits  even  then  were  by  no  means  unsqueezable,  but  curiously 
enough  they  failed  to  realise  this.  Voltaire's  rich  banker  would 
have  proved  embarrassing  here.  They  would  have  had  some 
difficulty  in  showing  how  a  reduction  of  his  extravagance  could 
possibly  have  endangered  production.  But  they  might  have  replied 
that  since  he  had  so  little  difficulty  in  squeezing  the  400,000  livres 
out  of  his  fellow-citizens  he  would  not  experience  much  more  trouble 
in  getting  another  400,000  out  of  them  and  paying  them  over  to  the 
State. 

Another  objection  consists  in  the  insufficiency  of  a  single  tax 
to  meet  all  the  needs  of  the  State.  "  In  some  States  it  is  said  that  a 
third,  a  half,  or  even  three-fourths  of  the  clear  net  revenue  from 
all  sources  of  production  is  insufficient  to  meet  the  demands  of  the 
Treasury,  and  consequently  other  forms  of  taxation  are  neces- 
sary." 2 

In  reply  to  this  the  Physiocrats  would  point  out  that  the  mere 
application  of  their  fiscal  system  would  result  in  such  an  increase 
in  the  net  product  that  the  yield  from  the  tax  would  progressively 
grow.  We  must  also  take  account  of  the  economies  resulting  from 
the  simplicity  of  the  tax,  and  the  almost  complete  absence  of 
expenses  of  collection.  But  the  most  interesting  point  of  all  is  that 
they  thought  the  State  should  adapt  its  needs  to  meet  its  revenue, 
and  not  vice  versa.  The  great  advantage  of  the  Physiocratic  impot, 
however,  was  that  it  was  regulated  by  a  natural  norm,  which  gave 
the  amount  of  the  net  product.  Without  this,  taxation  becomes 

that  we  have  the  poor  always  with  us.  Turgot  likewise  wished  to  state  the 
simple  fact,  and  not  to  draw  a  general  conclusion. 

1  Quesnay ,  Second  Probleme  iconomique,  p.  1 34.  The  argument  which  follows 
is  rather  curious.  He  does  not  seem  to  think  that  a  fall  in  wages  even  below  the 
minimum  would  result  in  the  death  of  many  people,  but  simply  that  it  would 
result  in  emigration  to  other  countries,  and  that  as  a  consequence  of  such  emigra- 
tion the  diminished  supply  at  home  would  soon  lead  to  higher  wages  being 
paid — a  fairly  optimistic  conclusion  for  the  period. 

1  Baudeau  (p.  770)  points  out  the  error  of  confusing  the  gross  revenue 
with  the  net  revenue.  Allowance  should  be  made  for  the  cost  of  collecting 
the  revenue,  etc. 


44  THE  PHYSIOCRATS 

arbitrary.1  At  bottom  the  system  affords  a  barrier  against  the 
autocracy  of  the  sovereign — a  barrier  that  is  much  more  effective 
than  a  parliamentary  vote. 

One  of  the  disciples  of  Quesnay  put  the  theory  to  the  test  of 
practice.  The  Margrave  of  Baden  had  the  advantage  of  being 
a  prince,  and  he  proceeded  to  experiment  on  his  own  subjects.  The 
system  was  tried  in  three  communes  of  his  principality,  but,  like  most 
social  experiments,  failed.  In  two  of  the  communes  it  was  abandoned 
at  the  end  of  four  years.  In  a  third,  despite  its  evil  effects,  it  was 
prolonged  until  1802.  The  increase  in  the  land  tax  caused  a  veritable 
slump  in  the  value  of  property  just  when  the  remission  of  taxes  upon 
consumption  was  resulting  in  the  rapid  multiplication  of  wineshops 
and  beerhouses.2  It  is  unnecessary  to  add  that  the  failure  of  the 
experiment  did  nothing  to  weaken  the  faith  of  the  Margrave  or  his 
fellow  Physiocrats.  An  experiment  on  so  small  a  scale  could  not 
possibly  be  accepted  as  decisive.  This  is  the  usual  retort  of  inno- 
vators when  social  experiments  prove  failures,  but  we  must  recognise 
the  element  of  truth  contained  in  their  reply. 

But  if  we  wish  to  see  the  real  results  of  the  Physiocratic  system 
we  must  look  beyond  the  private  experiments  of  a  prince.  Elsewhere 
the  effects  were  much  more  far-reaching. 

The  fiscal  aspect  of  the  French  Revolution  owed  its  guiding 
inspiration  to  their  ideas.  Out  of  a  budget  of  500  million  francs  the 
Constituent  Assembly  decreed  that  about  half  of  it — that  is,  240 
millions — should  be  got  out  of  a  tax  levied  upon  land,  equal  to  a  tax 
of  2400  million  francs  nowadays ;  and  the  greatest  part  of  it  was 
to  be  raised  by  direct  taxation. 

Distrust  of  indirect  taxation,  and  of  all  taxes  on  commodities, 
is  also  a  consequence  of  the  Physiocratic  system — a  distrust  that  is 
bound  to  grow  as  society  becomes  more  democratic.  Most  of  the 
arguments  in  favour  of  direct  taxation  are  to  be  found  in  the  Physio- 
cratic writings.  But  the  chief  one  employed  nowadays — namely, 
that  indirect  taxes  often  bear  no  proportion  to  the  amount  of  the 

1  "  If  unfortunately  it  be  true  that  three-tenths  of  the  annual  product  is  not 
sufficient  to  cover  the  ordinary  expenditure,  there  is  only  one  natural  and  reason- 
able conclusion  to  be  drawn  from  this,  namely,  curtail  the  expenditure."  (Dupont 
de  Nemours,  p.  775.) 

"  The  tax  must  never  be  assessed  in  accordance  with  individual  caprice.  The 
amount  is  determined  by  the  natural  order."  (Dupont,  SurT  Origin  d'un  Science 
nourelle.)  Neither  should  the  State,  in  their  opinion,  exceed  the  limit,  because 
it  would  mean  having  recourse  to  borrowing,  which  would  simply  mean  increased 
deferred  taxation. 

*  See  M.  Gargon's  instructive  brochure,  Un  Prince  ollemand  physiocraie,  for  a 
resume  of  the  Margrave's  correspondence. 


OF  THE  PHYSIOCRATIC  DOCTRINE        45 

revenue,  but  weigh  heaviest  upon  those  who  have  least,  is  not  among 
them.  This  concern  about  proportionality,  which  is  merely  another 
word  for  justice,  was  quite  foreign  to  their  thoughts.1 

At  a  later  stage  of  this  work  it  will  be  our  duty  to  call  attention 
to  the  enthusiasm  aroused  by  this  old  theory  of  an  impot  unique  as 
advocated  in  the  works  of  an  eminent  American  economist,2  who 
renders  homage  to  the  Physiocrats  for  inspiring  him  with  ideals 
altogether  opposed  to  those  of  the  landed  proprietors.  And  a  similar 
movement  under  the  very  same  name — the  single-tax  system — is 
still  vigorous  in  the  United  States. 


IV :  RESUME  OF  THE  PHYSIOCRATIC  DOCTRINE. 
CRITICS  AND  DISSENTERS 

A  BRIEF  risumi  of  the  contributions  made  to  economic  science  by 
the  Physiocrats  will  help  us  to  realise  their  great  importance. 
From  the  theoretical  point  of  view  we  have  : 

1.  The  idea  that  every  social  phenomenon  is  subject  to  law, 
and  that  the  object  of  scientific  study  is  to  discover  such  laws. 

2.  The  idea  that  personal  interest  if  left  to  itself  will  discover 
what  is  most  advantageous  for  it,  and  that  what  is  best  for  the 
individual  is  also  best  for  everybody.     But  this  liberal    doctrine 
had  many  advocates  before  the  Physiocrats. 

3.  The  conception  of  free  competition,  resulting  in  the  establish- 
ment of  the  bon  prix,  which  is  the  most  advantageous  price  for 
both  parties,  and  implies  the  extinction  of  all  usurious  profit. 

4.  An  imperfect  but  yet  searching   analysis  of  production,  and 
of  the  various  divisions  of  capital.     An  excellent  classification  of 
incomes  and  of  the  laws  of  their  distribution. 

5.  A   collection  of  arguments   which   have  long  since   become 
classic  in  favour  of  landed  property. 

From  a  practical  point  of  view  we  have  : 

1.  The  freedom  of  labour. 

2.  Free  trade  within  a  country,  and  an  impassionate  appeal  for 
the  freedom  of  foreign  trade. 

3.  Limitation  of  the  functions  of  the  State. 

4.  A  first-class  demonstration  of  the  superiority  of  direct  taxation 
over  indirect. 

1  We  find  the  word  in  one  of  Dupont's  letters  to  Say,  but  that  is  much  later. 

1  Henry  George  dedicated  his  volume  entitled  Protection  or  Free  Trade  to 
them  because  he  considered  that  they  were  his  masters.  But  his  tribute  loses  its 
point  somewhat  when  we  remember  that  he  admits  that  he  had  never  read  them. 


46  THE  PHYSIOCRATS 

It  is  unjust  to  reproach  the  Physiocrats,  as  is  sometimes  done, 
with  giving  us  nothing  but  social  metaphysics.  A  little  over- 
systemisation  may  prove  useful  in  the  early  stages  of  a  science.  Its 
very  faults  have  some  usefulness.  We  must  admit,  however,  that 
although  their  conception  of  the  "  natural  order "  supplied  the 
foundation,  or  at  least  the  scaffolding,  for  political  economy,  it  be- 
came so  intertwined  with  a  kind  of  optimism  that  it  nullified  the 
work  of  the  Liberal  school,  especially  in  France.1 

But  the  greatest  gap  in  the  Physiocratic  doctrine  is  the  total 
absence  of  any  reference  to  value,  and  their  grossly  material,  almost 
terrestrial,  conception  of  production.  They  seldom  mention  value, 
and  what  little  they  do  say  is  often  confused  and  commonplace. 
Herein  lies  the  source  of  their  mistakes  concerning  the  unproductive 
character  of  exchange  and  industry,  which  are  all  the  more  remark- 
able in  view  of  the  able  discussions  of  this  very  question  by  a  number 
of  their  contemporaries.  Among  these  may  be  mentioned  Cantillon,* 
who  resembles  them  in  some  respects  and  whose  essay  on  commerce 
was  published  in  1755 ;  the  Abbe  Galiani,  who  dealt  with  the 
question  in  his  Delia  Moneta  (1750) ;  and  the  Abbe  Morellet,  who  dis- 
cussed the  same  topic  in  his  Prospectus  (Pun  Nouveau  Dictionnaire  du 
Commerce  (1769).  More  important  than  any  of  them,  perhaps,  is 
Condillac,  whose  work  Du  Commerce  et  du  Gouvernement  was  unfor- 
tunately not  published  until  1776  ;  but  by  that  time  the  Physiocratic 
system  had  been  completed,  and  their  pre-eminence  well  established. 

1  Listen  to  Mercier  de  la  Riviere  :  "  We  must  admire  the  way  in  which  one 
man  becomes  an  instrument  for  the  happiness  of  others,  and  the  manner  in  which 
this  happiness  seems  to  communicate  itself  to  the  whole.  Speaking  literally, 
of  course  I  do  not  know  whether  there  will  not  be  a  few  unhappy  people  even  in 
this  State,  but  their  numbers  will  be  so  few  and  the  happy  ones  will  be  so  numerous 
that  we  need  not  be  much  concerned  about  helping  them.  All  our  interests 
and  wills  will  be  linked  to  the  interest  and  will  of  the  sovereign,  forming  for  our 
common  good  a  harmony  which  can  only  be  regarded  as  the  work  of  a  kind 
Providence  that  wills  that  the  land  shall  be  full  of  happy  men."  This  enchanting 
picture  only  applies  to  future  society,  when  the  "  natural  order  "  will  be  estab- 
lished. The  optimism  of  the  Physiocrats  is  very  much  like  the  anarchists'. 

*  Very  little  seems  to  have  been  known  about  Cantillon  for  more  than  a  century 
after  his  death.  But,  like  all  the  rediscovered  founders  of  the  science,  he  has 
received  considerable  attention  for  some  years  past.  His  influence  upon  the 
Physiocrats  has  perhaps  been  exaggerated.  Mirabeau's  earliest  book,  L'Ami  des 
Hommea,  which  appeared  just  twelve  months  after  Cantillon's  work,  is  un- 
doubtedly inspired  by  Cantillon.  No  discussion  of  his  work  is  included  in  the  text 
because  it  was  felt  that  it  might  interfere  with  the  plan  of  the  work  as  already 
mapped  out.  There  are  several  articles  in  various  reviews  which  deal  with 
Cantillon's  work,  the  earliest  being  that  contributed  by  Stanley  Jevons  to  the 
Contemporary  Review  in  1881, 


RBSUMS  OF  THE  PHYSIOCRATIC  DOCTRINE        47 

Turgot,  though  one  of  their  number,  is  an  exception.  He  was 
never  a  thoroughgoing  Physiocrat,  and  his  ideas  concerning  value 
are  much  more  scientific.1  He  defines  it  as  "  an  expression  of  the 
varying  esteem  which  man  attaches  to  the  different  objects  of  his 
desire."  This  definition  gives  prominence  to  the  subjective  character 
of  value,  and  the  phrases  "  varying  esteem  "  and  "  desire  "  give  it 
greater  precision.2  It  is  true  that  he  also  added  that  besides  this 
relative  attribute  value  always  implied  "  some  real  intrinsic  quality 
of  the  object."  He  has  frequently  been  reproached  for  this,  but  all 
that  he  meant  to  say  was  that  our  desire  always  implies  a  certain  cor- 
rectness of  judgment,  which  is  indisputable  unless  every  judgment 
is  entirely  illusory.  But  Turgot  would  never  have  admitted  that. 

It  is  possible  that  Turgot  inspired  Condillac,  and  that  he  himself 
owed  his  inspiration  to  Galiani,  whose  book,  which  appeared  twenty 
years  earlier,  he  frequently  quotes.  This  work  contains  a  very 
acute  psychological  analysis  of  value,  showing  how  it  depends  upon 
scarcity  on  the  one  hand  and  utility  on  the  other. 

Besides  a  difference  in  his  general  standpoint,  there  are  other 
considerations  which  distinguish  Turgot  from  the  members  of  the 
Physiocratic  school,  and  it  would  have  been  juster  to  him  as  well  as 
more  correct  to  have  devoted  a  whole  chapter  to  him.3  Generally 
speaking,  his  views  are  much  more  modern  and  more  closely  akin  to 
Smith's.  In  view  of  the  exigencies  of  space  we  must  be  content  to 
draw  attention  to  the  principal  doctrines  upon  which  he  differs  from 
the  Physiocrats. 

1.  The   fundamental   opposition   between   the   productivity   of 
agriculture  and  the  sterility  of  industry,  if  not  altogether  abandoned, 
is  at  least  reduced  in  importance. 

2.  Landed  property  is  no  longer  an  institution  of  divine  origin. 
Even  the  appeal  to  the  "  ground  expenses  "  is  dropped.  As  an  institu- 
tion it  rests  merely  upon  the  fact  of  occupation  and  public  utility. 

3.  Movable  property,   on  the  other  hand,   holds  a  prominent 

1  Valeurs  etMonnaies,  which  dates  from  1769,  and  again  in  his  Reflexions. 
Quesnay's  conception  of  value  may  be  gleaned  from  his  article  entitled  Hommes, 
which  remained  unpublished  for  a  long  time,  and  has  only  recently  appeared 
in  the  Revue  d'Histoire  des  Doctrines  iconomiques  et  societies,  vol.  i,  No.  1. 

1  He  dilates  at  considerable  length  on  the  distinction  between  estimative 
value  (what  would  now  be  called  subjective  value)  and  appreciative  (or  social) 
value.  The  first  depends  upon  the  amount  of  time  and  trouble  we  are  willing 
to  sacrifice  in  order  to  acquire  it.  In  this  connection  the  notion  of  labour- value 
appears.  As  to  appreciative  value,  it  differs  from  the  preceding  only  in  being 
an  "  average  estimative  value." 

3  Turgot,  though  a  disciple  of  Quesnay,  remained  outside  the  Physiocratio 
school.  He  always  referred  to  them  contemptuously  as  "  the  sect." 


48  THE  PHYSIOCRATS 

place.  The  function  of  capital  is  more  carefully  analysed  and  the 
legitimacy  of  interest  definitely  proved. 

But  we  must  turn  to  Condillac's  book  if  we  want  to  see  how  the 
Physiocratic  doctrine  should  be  completed  and  expurgated  of  its 
errors.  Condillac  was  already  well  known  as  a  philosopher  when, 
in  his  sixtieth  year,  he  published  this  new  work  in  1776.  This 
admirable  book,  entitled  I*e  Commerce  et  le  Gouvernement  considers 
relativement  Vun  a  Vautre,  contains  an  outline  of  most  modern  problems. 
The  title  gives  no  adequate  indication  of  the  character  of  the  work, 
and  possibly  accounts  for  the  oblivion  into  which  the  book  has  fallen. 

It  is  a  genuine  economic  treatise,  and  not  a  medley  of  economic 
and  political  suggestions  concerning  social  science,  with  an  admixture 
of  ethics  and  jurisprudence.  Value  is  regarded  as  the  foundation 
of  the  science,  and  the  Physiocrats  are  thus  out-classed  from  the 
very  first.1  Value  itself  is  considered  to  be  based  upon  utility,  which 
is  stripped  of  its  popular  meaning,  and  given  a  scientific  connotation 
which  it  has  never  lost.  It  no  longer  implies  an  intrinsic,  physical 
property  of  matter,  but  connotes  a  degree  of  correspondence  between 
a  commodity  and  a  given  human  want.  "  Value  is  not  an  attribute 
of  matter,  but  represents  our  sense  of  its  usefulness,  and  this  utility 
is  relative  to  our  need.  It  grows  or  diminishes  according  as  our 
need  expands  or  contracts."  This  is  the  foundation  of  the  psycho- 
logical theory  of  value.2 

But  this  is  not  all — though  a  great  deal.  He  clearly  realises  that 
utility  is  not  the  only  determinant  of  value ;  that  quantity,  i.e.  scarcity 
or  abundance,  also  exercises  an  important  influence.  With  admirable 
judgment  he  seizes  upon  the  connection  between  them,  and  shows 
how  the  two  statements  are  united  in  one,  for  quantity  only  influences 
value  according  as  its  action  upon  utility  intensifies  or  weakens  de- 
mand. "  But  since  the  value  of  things  is  based  upon  need  it  is  natural 
that  a  more  keenly  felt  need  should  endow  things  with  greater  value, 
while  a  less  urgent  need  endows  them  with  less.  Value  increases 
with  scarcity  and  diminishes  with  plenty.  In  case  of  plenty  it  may 
even  disappear  ;  a  superabundant  good  will  be  valueless  if  one 
has  no  use  for  it."  8  This  could  not  be  put  more  clearly  to-day. 
Here  we  have  the  germ  of  the  theories  of  Jevons  and  the  Austrian 
school,  though  it  took  a  long  time  to  develop. 

We  might  naturally  expect  a  superior  treatment  of  exchange 
following  upon  this  new  theory  of  value.  If  value  is  simply  the 

1  "  I  am  so  struck  with  this  notion  that  I  think  it  must  serve  as  the  basis  of 
this  whole  treatise."  (Chap.  1.) 

7  Le  Commerce  et  le  Gouvernement,  p.  15.  *  Ibid.,  Part  I,  chap.  1. 


RESUME  OF  THE  PHYSIOCRATIC  DOCTRINE         49 

satisfaction  of  want,  exchange  creates  two  values  when  it  satisfies 
two  needs  at  the  same  time.  The  characteristic  of  exchange  is  that 
each  of  the  two  parties  yields  what  it  has  in  superabundance  in  return 
for  what  it  needs.  But  what  is  given  up  is  superabundant,  is  useless, 
and  consequently  valueless  ;  what  is  demanded  has  greater  utility, 
and  consequently  greater  value.  Two  men  come  to  market  each 
with  a  useless  thing,  and  each  returns  with  a  useful  one.1  Conse- 
quently the  Physiocratic  saying  that  exchange  means  no  gain  to 
anyone,  or  at  least  that  the  gain  of  on  3  only  compensates  for  the 
loss  of  the  others,  is  seen  to  be  radically  false.  The  Physiocrats — 
notably  Trosne — attempted  a  reply,  but,  for  reasons  already  given, 
they  never  succeeded  in  realising  the  subjective  character  of  value. 

This  same  theory  should  have  carried  Condillac  a  stage  further, 
and  helped  in  the  rectification  of  the  Physiocratic  error  concerning 
production.  If  value  is  simply  utility  and  utility  itself  is  just  the 
correspondence  between  things  and  our  demand  for  them,  what  is 
the  agency  that  produces  this  harmony  between  things  and  desires  ? 
It  is  very  seldom  that  nature  succeeds  in  establishing  it.  "  Nature 
is  frequently  fertile  in  things  we  have  no  desire  for  and  lavish  of 
what  is  useless  " — a  profound  remark  that  ought  to  have  cooled 
the  Physiocrats'  love  of  the  Alma  Parens.  "  Matter  is  transformed 
and  made  useful  by  dint  of  human  labour.  Production  means  giving 
new  form  to  matter."  2  If  this  be  true,  then  there  is  no  difference 
between  agricultural  and  industrial  production,  for  they  both  trans- 
form what  already  exists.8 

Moreover,  the  theory  proves  very  clearly  that  if  artisans  and  pro- 
prietors are  dependent  upon  the  agriculturists — as,  indeed,  they  are — 
the  latter  in  their  turn  are  nothing  but  artisans.  "  If  someone  asks 
whether  agriculture  ought  to  be  preferred  to  manufacture  or  manufac- 
ture to  agriculture,  we  must  reply  that  we  have  no  preferences,  and 
that  the  best  use  should  be  made  of  both."  * 

Lastly,  his  definition  of  wages,  short  as  it  is,  is  of  immense 
significance.  "  Wages  represent  the  share  of  the  product  which  is 

1  "  It  is  not  correct  to  say  that  the  exchanged  values  are  equal ;  on  the 
contrary,  each  party  seeks  to  give  a  smaller  value  in  exchange  for  a  larger  one. 
The  process  proves  advantageous  to  both ;  hence,  doubtless,  the  origin  of  the 
idea  that  the  values  must  be  equal.  But  one  ought  to  have  come  to  the  conclu- 
sion that  if  each  gains  both  must  have  given  less  and  obtained  more."  (Op.  cit., 
pp.  55,  86.)  Compare  this  with  the  quotation  from  do  Trosne,  p.  27,  and  note  its 
psychological  superiority.  *  Op.  cit.,  Part  I,  chap.  9. 

3  "  Even  where  the  land  is  covered  with  products  there  is  no  additional 
material  beyond  what  there  was  formerly.  They  have  just  boon  given  a  new 
form,  and  wealth  consists  merely  of  such  transformations." 

*  Op.  cit.,  Part  1,  chap.  29. 


50  ADAM  SMITH 

due  to  the  workers  as  co-partners."  J  Wages  only  "  represent  "  the 
share  that  is  due  to  the  workers.  In  other  words,  the  wage-earner, 
either  through  want  of  will  or  of  power,  cannot  exercise  his  rightful 
claim  to  his  own  work,  and  simply  surrenders  the  claim  in  return  for 
a  money  price.  This  constitutes  his  salary,  which  is  regulated,  like 
every  other  price,  by  competition  between  buyers  and  sellers. 
Condillac  makes  no  reference  to  an  iron  law  of  wages,  but  regards 
them  as  determined  by  the  forces  of  demand  and  supply.  He  does, 
however,  hint  at  the  implicit  alliance  which  exists  between  capital 
and  labour.2 

From  a  practical  standpoint  also,  especially  in  his  defence  of  free 
labour  and  his  condemnation  of  corporations,  Condillac  is  more 
categorical  than  the  Physiocrats.  "  All  these  iniquitous  privileges," 
he  writes,  "  have  no  claim  to  a  place  in  the  order  beyond  the  fact 
that  they  are  already  established."  He  is  as  persistent  as  Turgot 
in  his  justification  of  the  taking  of  interest  and  in  his  demand  for 
the  determination  of  the  rate  by  competition.  This  very  elegant 
argument  is  employed  to  show  its  similarity  to  exchange  :  Exchange 
implies  compensation  for  overcoming  the  drawbacks  of  distance, 
whether  of  place  or  of  time.3  Exchange  generally  refers  to  place, 
interest  to  time,  and  this  is  really  the  foundation  of  the  modern  theory. 


CHAPTER  II:   ADAM  SMITH 

NOTWITHSTANDING  the  originality  and  vigour  displayed  by  the 
Physiocrats,  they  can  only  be  regarded  as  the  heralds  of  the  new 
science.  Adam  Smith,4  it  is  now  unanimously  agreed,  is  its  true 

1  In  a  recent  study  of  the  wage  bargain  we  find  M.  Chatelain  giving  expression 
to  similar  ideas,  though  apparently  knowing  nothing  of  Condillac's  work. 
1  Op.  cit.,  chap,  xv,  par.  8. 

*  See  Turgot,  Memoir e  aur  les  Frets  <T  Argent,  p.  122 :  "  In  every  bargain 
involving  the  taking  of  interest  a  certain  sum  of  money  is  given  now  in  exchange 
for  a  somewhat  larger  sum  to  be  paid  at  some  future  date  ;   difference  of  time 
as  well  as  of  place  makes  a  real  difference  to  the  value  of  money."     Further  on 
he  adds  (p.  127) :  "  The  difference  is  faniili&r  to  everyone,  and  the  well-known 
proverb  '  A  bird  in  the  hand  is  worth  two  in  the  bush  '  is  simply  a  popular  way  of 
expressing  it." 

*  The  life  of  Adam  Smith  presents  nothing  remarkable.     It  is  easily  summed 
up  in  the  story  of  his  travels,  his  professional  activities,  and  the  records  of  his 
friendships,  and  among  these  his  intimacy  with  Hume  the   philosopher    has 
become  classical.    He  was  born  at  Kirkcaldy,  in  Scotland,  on  June  5,  1723. 
From  1737  to  1740  he  studied  at  the  University  of  Glasgow  under    Francis 
Hutcheson,  the  philosopher,  to  whom  he  became  much  attached.     From  1740  to 


ADAM  SMITH  51 

founder.  The  appearance  of  his  great  work  on  the  Wealth  of  Nations 
in  1776  instantly  eclipsed  the  tentative  efforts  of  his  predecessors. 
To-day  the  Physiocratic  doctrines  scarcely  do  more  than  arouse 
historical  curiosity,  while  Smith's  work  has  been  the  guide  for 
successive  generations  of  economists  and  the  starting-point  of  all 
their  speculation.  Even  at  the  present  day,  despite  many  changes 
in  the  fundamental  principles  of  the  science,  no  economist  can  afford 
to  neglect  the  old  Scotch  author  without  unduly  narrowing  his 
scientific  horizon. 

Several  reasons  account  for  the  commanding  position  held  by 
this  book — a  position  which  no  subsequent  treatise  has  ever  suc- 
cessfully rivalled. 

First  is  its  supreme  literary  charm.  It  is  above  all  an  interesting 
book,  bristling  with  facts  and  palpitating  with  life.  The  burning 
questions  of  the  hour,  such  as  the  problems  presented  by  the  colonial 
regime,  the  trading  companies,  the  mercantile  system,  the  monetary 
question,  and  taxation,  supply  the  author  with  congenial  themes  for 

1746  he  continued  his  studies  at  Oxford,  where  he  seems  to  have  worked  steadily, 
chiefly  by  himself.  The  intellectual  state  of  the  university  was  at  that  time 
extremely  low,  and  a  number  of  the  professors  never  delivered  any  lectures 
at  all.  Returning  to  Scotland,  he  gave  two  free  courses  of  lectures  at  Edinburgh, 
one  on  English  literature  and  the  other  on  political  economy,  in  the  course 
of  which  he  defended  the  principles  of  commercial  liberty.  In  1751  he  became 
Professor  of  Logic  at  Glasgow,  at  that  time  one  of  the  best  universities  in  Europe. 
Towards  the  end  of  the  year  he  was  appointed  to  the  chair  of  Moral  Philosophy, 
which  included  the  four  divisions  of  Natural  Theology,  Ethics,  Jurisprudence, 
and  Politics  within  its  curriculum.  In  1759  he  published  his  Theory  of  Moral 
Sentiments,  which  speedily  brought  him  a  great  reputation.  In  1764,  when 
forty  years  of  age,  he  quitted  the  professorial  chair  at  Glasgow  University 
and  accompanied  the  young  Duke  of  Buccleuch,  son-in-law  of  Charles  Townshend, 
the  celebrated  statesman,  on  his  travels  abroad.  With  the  young  nobility  of 
this  period  foreign  travel  frequently  took  the  place  of  a  university  training, 
on  account  of  the  disrepute  into  which  the  latter  had  fallen.  Smith  was  given  a 
pension  of  £300  a  year  for  the  rest  of  his  life,  so  that  the  mere  material  advantage 
was  considerably  in  excess  of  his  earnings  as  a  professor.  The  years  1764-66 
were  spent  in  this  way.  A  year  and  a  half  was  passed  at  Toulouse,  two  months 
at  Geneva,  where  he  met  Voltaire,  and  another  ten  months  at  Paris.  While 
in  Paris  he  became  acquainted  with  the  Physiocrats,  particularly  with  Turgot  and 
the  Encyclopaedists.  It  was  at  Toulouse  that  he  began  his  Wealth  of  Nations. 
Returning  to  Scotland  in  1767,  he  went  to  live  with  his  mother,  with  the  sole 
object  of  devoting  himself  to  this  work.  By  1773  the  book  was  nearly  complete. 
But  Smith  moved  to  London,  and  the  work  did  not  appear  till  1776.  By  this 
achievement  Smith  crowned  the  great  celebrity  which  he  already  enjoyed.  In 
January  1778  Smith  was  appointed  Commissioner  of  Customs  at  Edinburgh,  a 
distinguished  position  which  he  held  until  his  death  in  1790. 

All  that  we  know  of  Smith's  character  shows  him  to  have  been  a  man  of 
tender  feelings  and  of  great  refinement  of  character.  His  absent-mindedness 


52  ADAM  SMITH 

his  treatment.  His  discussion  of  these  questions  is  marked  by  such 
mastery  of  detail  and  such  balance  of  judgment  that  he  convinces 
without  effort.  His  facts  are  intermixed  with  reasoning,  his  illustra- 
tions with  argument.  He  is  instructive  as  well  as  persuasive.  Withal 
there  is  no  trace  of  pedantry,  no  monotonous  reiteration  in  the  work, 
and  the  reader  is  not  burdened  with  the  presence  of  a  cumbersome 
logical  apparatus.  All  is  elegantly  simple.  Neither  is  there  the 
slightest  suggestion  of  the  cynic.  Rather  a  passion  of  genuinely 
human  sympathy,  occasionally  bordering  upon  eloquence,  breathes 
through  the  pages.  Thanks  to  rare  qualities  such  as  these  we  can 
still  feel  something  of  the  original  freshness  of  this  old  book. 

In  addition  to  this,  Smith  has  been  successful  in  borrowing  from 
his  predecessors  all  their  more  important  ideas  and  welding  them 
into  a  more  general  system.  He  superseded  them  because  he 
rendered  their  work  useless.  A  true  social  and  economic  philosophy 
was  substituted  for  their  fragmentary  studies,  and  an  entirely  new 
value  given  to  their  contributions.  Taken  out  of  their  isolation,  they 
help  to  illustrate  his  general  theory,  becoming  themselves  illuminated 
in  the  process. 

has  become  proverbial.  In  politics  his  sympathies  were  with  the  Whigs.  In 
religion  he  associated  himself  with  the  deists,  a  school  that  was  greatly  in  vogue 
towards  the  end  of  the  eighteenth  century,  and  of  which  Voltaire,  who  was  much 
admired  by  Smith,  was  the  most  celebrated  representative. 

For  a  long  time  the  only  life  of  Smith  which  we  possessed  was  the  memoir 
written  by  Dugald  Stewart,  Account  of  the  Life  and  Writings  of  Adam  Smith, 
and  read  by  him  in  1793  before  the  Royal  Society  of  Edinburgh.  It  appeared 
in  the  Transactions  of  the  society  for  1794,  and  was  published  in  volume  form  in 
1811  along  with  other  biographies,  under  the  title  of  Biographical  Memoir 9  oj 
Adam  Smith,  Robertson,  etc.,  by  Dugald  Stewart.  To-day  we  are  more  fortunate, 
John  Rae  in  his  charming  Life  of  Adam  Smith  (London,  1895)  has  succeeded 
in  bringing  to  light  all  that  we  can  know  of  Smith  and  his  circle.  To  him 
we  are  indebted  for  mcst  of  the  details  we  havo  given.  In  1894  James  Bonar 
published  a  catalogue  of  Smith's  library,  containing  about  2300  volumes,  and 
comprising  about  two-thirds  of  his  whole  library.  A  still  more  important  con- 
tribution to  the  study  of  Smith's  ideas  has  been  made  by  Dr.  Edwin  Cannan, 
who  in  1896  published  Lectures  on  Justice,  Police,  Revenue,  and  Arms,  delivered 
in  Glasgow  by  Adam  Smith,  from  Notes  taken  by  a  Student  in  1763  (Oxford). 
This  represents  the  course  of  lectures  on  political  economy  delivered  by  Smith 
while  professor  at  Glasgow.  A  manuscript  copy  of  the  notes  taken  in  this 
course  by  a  student,  probably  in  1763,  was  accidentally  discovered  by  a 
London  solicitor  in  1876.  These  notes  were  in  1895  forwarded  to  Dr.  Cannan 
for  publication.  They  are  especially  precious  in  helping  us  to  understand  Smith's 
ideas  before  his  stay  in  France  and  his  meeting  with  the  Physiocrats.  Of  the 
numerous  editions  of  the  Wealth  of  Nations  which  have  hitherto  been  published, 
the  more  important  are  those  of  Buchanan,  McCulloch,  Thorold  Rogers,  and 
Nicholson.  The  latest  critical  edition  is  that  of  Dr.  Cannan,  publishedin  1904  by 
Methuen,  containing  very  valuable  notes.  This  is  the  edition  we  have  used. 


ADAM  SMITH  53 

Like  most  great  writers,  Smith  knows  how  to  borrow  without 
impairing  his  originality.  Over  a  hundred  authors  are  quoted  in 
his  book,  but  he  does  not  always  acknowledge  them.  The  names  of 
some  of  the  writers  who  exercised  such  influence  over  him,  and 
opened  up  the  path  which  he  afterwards  followed,  deserve  more 
than  a  passing  reference. 

The  first  place  among  these  belongs,  perhaps,  to  Hutcheson, 
Smith's  predecessor  in  the  chair  of  Moral  Philosophy  at  Glasgow. 
The  divisions  of  the  subject  are  almost  identical  with  those  given  by 
Hutcheson,  and  many  of  Smith's  best  known  theories  can  be  traced 
in  the  System  of  Moral  Philosophy  published  by  Hutcheson  in 
1755,  but  which  we  know  was  written  long  before.  Hutcheson  laid 
great  stress  upon  the  supreme  importance  of  division  of  labour,  and 
his  views  on  such  questions  as  the  origin  and  variations  in  the  value 
of  money  and  the  possibility  of  corn  or  labour  affording  a  more 
stable  standard  of  value  closely  resemble  those  of  the  Wealth  of 
Nations. 

David  Hume  is  a  near  second.  Smith  refers  to  him  as  "  by  far 
the  most  illustrious  philosopher  and  historian  of  the  present  age,"1 
and  from  1752  onward  they  were  the  closest  of  friends.  Hume  was 
already  the  author  of  some  essays  on  economic  questions,  the  most 
important  among  them  dealing  with  money,  foreign  trade,  the  rate 
of  interest,  etc.  These,  along  with  several  other  writings,  were  pub- 
lished in  the  Political  Discourses  in  1752.  Hume's  examination  of 
these  problems  displays  his  original  penetrative  thought,  and  there 
is  evident  the  profundity  and  lucidity  of  treatment  characteristic 
of  all  his  writings.  The  absurdity  of  the  Mercantile  policy  and 
of  interfering  with  the  natural  tendency  of  money  to  adapt  itself 
to  the  needs  of  each  community,  the  sophistry  of  the  balance  of 
trade  theory,  and  the  impious  consequences  resulting  from  com- 
mercial jealousy  among  nations  are  exposed  with  admirable  force 
in  these  essays.  No  doubt  the  essays  left  a  great  impression  upon 
Smith.  He  quoted  them  in  his  lectures  at  Glasgow,  and  Hume 
consulted  him  before  bringing  out  a  second  edition.  It  is  true  that 
Smith  eventually  became  the  stauncher  Liberal  of  the  two.  Hume, 
in  his  essay  on  the  Balance  of  Trade,  recognized  the  legitimacy  of 
certain  protective  rights  which  Smith  wished  removed  altogether. 
Still  it  was  to  Hume  that  Smith  owed  his  conversion  to  the  Liberal 
faith. 

On  this  matter  of  commercial  liberty  there  was  already,  towards 
the  end  of  the  seventeenth  and  the  beginning  of  the  eighteenth 
1  Wealth  of  Nations,  vol.  ii,  p.  275. 


54  ADAM  SMITH 

centuries,  a  small  but  a  growing  band  of  Mercanti lists  who  had 
begun  to  protest  against  the  irksomeness  of  the  Customs  regulations. 
They  were,  of  course,  still  largely  imbued  with  mercantile  prejudice, 
but  they  are  rightly  classed  as  "  Liberals."  Just  as  in  France 
Boisguillebert  had  foreshadowed  the  Physiocrats,  so  in  England 
Child,  Petty,  Tucker,  Dudley  North,  and  Gregory  King  had  been 
preparing  the  way  for  a  more  liberal  policy  in  foreign  trade.1 

In  addition  to  Hutcheson  and  Hume  one  other  writer  must  be 
mentioned  in  this  connection,  namely,  Bernard  de  Mandeville.  He 
was  not  an  economist  at  all,  but  a  doctor  with  considerable  philo- 
sophical interests.  In  1704  he  had  published  a  small  poem,  which, 
along  with  a  number  of  additions,  was  republished  in  1714  under  the 
title  of  The  Fable  of  the  Bees  ;  or,  Private  Vices  Public  Benefits.  The 
fundamental  idea  of  the  book,  which  caused  quite  a  sensation  at  the 
time,  and  which  was  seized  by  order  of  the  Government,  is  that 
civilisation — understanding  by  that  term  not  only  wealth,  but  also 
the  arts  and  sciences — is  the  outcome,  not  of  the  virtues  of  mankind, 
but  of  what  Mandeville  calls  its  vices ;  in  other  words,  that  the 
desire  for  well-being,  comfort,  luxury,  and  all  the  pleasures  of  life 
arises  from  our  natural  wants.  The  book  was  a  sort  of  apology 
for  the  natural  man  and  a  criticism  of  the  virtuous. 

Smith  criticised  Mandeville  in  his  Theory  of  Moral  Sentiments* 
and  reproached  him  particularly  for  referring  to  tastes  and  desires  as 
vices  though  in  themselves  they  were  nowise  blameworthy.  But 
despite  his  criticism  Mandeville's  idea  bore  fruit  in  Smith's  mind. 
Smith  in  his  turn  was  to  reiterate  the  belief  that  it  was  personal 
interest  (in  his  opinion  no  vice,  but  an  inferior  virtue)  that  unwittingly 
led  society  in  the  paths  of  well-being  and  prosperity.  A  nation's 
wealth  for  Smith  as  well  as  for  Mandeville  is  the  result,  if  not  of  a 
vice,  at  least  of  a  natural  instinct  which  is  not  itself  virtuous,  but 
which  is  bestowed  upon  us  by  Providence  for  the  realisation  of 
ends  that  lie  beyond  our  farthest  ken. 

Such  are  the  principal  writers  in  whose  works  we  may  find  an 
outline  of  some  of  the  more  important  ideas  which  Smith  was  to 
incorporate  in  a  true  system. 

Mere  systematisation,  however,  would  not  have  given  the  Wealth 
of  Nations  its  unique  position.  Prior  to  Smith's  time  attempts  had 
been  made  by  Quesnay  and  the  Physiocrats  to  outline  the  scope  of 

1  On  this  point  see  Schatz's  Individualisme,  economique  et  social  (Paris, 
1908). 

*  Chap  iv  of  sec.  ii  of  the  7th  part  of  the  Theory  of  Moral  Sentiments  is  entitled 
Of  Syatemt  of  License. 


ADAM  SMITH  55 

the  science  and  to  link  its  various  portions  together  by  means  of  a 
few  general  principles.  Although  he  was  not  the  first  to  produce  a 
connected  scientific  treatise  out  of  this  material,  he  had  a  much 
greater  measure  of  success  than  any  of  his  predecessors. 

Smith  owed  much  to  the  Physiocrats,  but  he  had  little  personal 
acquaintance  with  them  beyond  that  afforded  by  his  brief  stay  in 
Paris  in  1765.  Slight  as  the  intimacy  was,  however,  there  is  no 
doubt  about  the  influence  they  had  upon  him.  It  is  also  very  im- 
probable that  he  had  read  all  their  works  :  Turgot's  Reflexions,  for 
example,  written  in  1766,  but  only  published  in  1769-70,  was  probably 
not  known  to  him.  But  frequent*  personal  converse  with  both 
Turgot  and  Quesnay  had  helped  him  in  acquiring  precise  first-hand 
knowledge -of  their  views.  We  can  easily  guess  which  ideas  would 
attract  him  most. 

On  one  point  at  least  he  had  no  need  to  be  enlightened,  for  in  the 
matter  of  economic  liberalism  he  had  long  been  known  as  a  doughty 
champion.  But  the  ardent  faith  of  the  Physiocrats  must  have 
strengthened  his  own  belief  very  considerably. 

On  the  other  hand,  it  appears  that  he  borrowed  from  the  Physio- 
crats the  important  idea  concerning  the  distribution  of  the  annual 
revenue  between  the  various  classes  in  the  nation.  In  his  lectures 
at  Glasgow  he  scarcely  mentions  anything  except  production,  but 
in  the  Wealth  of  Nations  an  important  place  is  given  to  distribution. 
The  difference  can  hardly  be  explained  except  upon  the  hypothesis 
of  Smith's  growing  acquaintance  with  the  Tableau  tconomique  and 
the  theory  of  the  "  net  product." 

But  admitting  that  he  borrowed  what  was  most  characteristic 
and  most  suggestive  in  their  teaching,  his  treatment  of  its  many 
complicated  aspects  is  altogether  superior  to  theirs.  The  Physiocrats 
were  so  impressed  by  the  importance  of  agriculture  that  they  utterly 
failed  to  see  the  problem  in  its  true  perspective.  They  scanned  the 
field  through  a  crevice,  and  their  vision  was  consequently  narrow 
and  limited.  Smith,  on  the  other  hand,  took  the  whole  field  of 
economic  activity  as  his  province,  and  surveyed  the  ground  from  an 
eminence  where  the  view  was  clearest  and  most  extensive. 

The  economic  world  he  regarded  as  a  vast  workshop  created  by 
division  of  labour,  one  universal  psychological  principle — the  desire 
of  everyone  to  better  his  lot — supplying  unity  to  its  diverse  pheno- 
mena. Political  economy  was  at  last  to  be  based,  not  on  the  interests 
of  a  particular  class,  whether  manufacturing  or  agricultural,  but 
upon  a  consideration  of  the  general  interest  of  the  whole  community. 
Such  are  the  directing  principles  that  inspire  the  whole  work,  the 


56  ADAM  SMITH 

guiding  lines  amidst  what  had  hitherto  seemed  a  mere  chaos 
of  economic  facts.  Contemporaries  never  counted  upon  the  diffi- 
culties which  the  new  science  was  bound  to  encounter,  so  great  was 
their  enthusiasm  at  having  a  fixed  standpoint  from  which  for  the 
first  time  the  complex  interests  of  agriculture,  industry,  and  com- 
merce might  be  impartially  surveyed.  With  Smith  the  study 
emerged  from  the  "  system  "  stage  and  became  a  science. 

Our  examination  of  Smith's  views  will  be  grouped  around  three 
points  : 

(I)  Division  of  labour. 

(II)  The  "natural"  organisation  of  the  economic  world  under 
the  influence  of  personal  interest. 

(III)  Liberalism. 

I :  DIVISION  OF  LABOUR 

IT  was  Quesnay  who  had  propounded  the  theory  that  agriculture 
was  the  source,  of  all  wealth,  both  the  State's  and  the  individual's.1 
Adam  Smith  seized  upon  the  phrase  and  sought  to  disprove  it  in  his 
opening  sentence  by  giving  to  wealth  its  true  origin  in  the  general 
activity  of  society.  "  The  annual  labour  of  every  nation  is  the  fund 
which  originally  supplies  it  with  all  the  necessaries  and  conveniences 
of  life  which  it  annually  consumes,  and  which  consist  always  either 
in  the  immediate  produce  of  that  labour  or  in  what  is  purchased  with 
that  produce  from  other  nations." 

Labour  is  the  true  source  of  wealth.  When  Smith  propounded 
this  celebrated  theory,  which  has  given  rise  to  so  many  misunder- 
standings since,  it  was  not  intended  that  it  should  minimise  the 
importance  of  natural  forces  or  depreciate  the  part  which  capital 
plays  in  production.2  No  one,  except  perhaps  J.  B.  Say,  has  been 
more  persistent  in  emphasising  the  importance  of  capital,  and  to  the 
land,  as  we  shall  presently  see,  he  attributed  a  special  degree  of  pro- 
ductivity. But  from  the  very  outset  Smith  was  anxious  to  emphasise 
the  distinction  between  his  doctrine  and  that  of  the  Physiocrats. 
So  he  definitely  affirms  that  it  is  human  activity  and  not  natural 
forces  which  produces  the  mass  of  commodities  consumed  every  year. 

1  One  ken's  edition,  p.  331. 

1  The  theory  that  there  are  three  factors  of  production,  which  has  since  become 
a  commonplace  of  economics,  is  not  to  be  found  in  Smith.  Indirectly,  however, 
it  was  he  who  originated  the  idea  by  distinguishing  in  his  treatment  of  distribu- 
tion between  the  various  sources  of  revenue.  The  distinction  once  made,  it  waa 
quite  natural  to  consider  each  source  as  a  factor  of  production  ;  and  this  is  just 
what  J.  B.  Say  did  in  his  Treatise  (2nd  ed.,  chaps,  iv  and  v).  Cf.  Cannan's 
History  of  the  Theories  of  Production  and  Distribution,  p.  40  (1894). 


DIVISION  OF  LABOUR  57 

Without  the  former's  directing  energy  the  latter  would  for  ever 
remain  useless  and  fruitless. 

He  is  not  slow  to  draw  inferences  from  this  doctrine.  Work, 
employed  in  the  widest  sense,  and  not  nature,  is  the  parent  of  wealth 
— not  the  work  of  a  single  class  like  the  agriculturists,  but  the  work 
of  all  classes.  Hence  all  work  has  a  claim  to  be  regarded  as  produc- 
tive. The  nation's  annual  income  owes  something  to  everyone  who 
toils.  It  is  the  result  of  their  collaboration,  of  their  **  co-operation  " 
as  he  calls  it.  There  is  no  longer  any  need  for  the  distinction  between 
the  sterile  and  the  productive  classes,  for  only  the  idle  are  sterile. 

A  nation  is  just  a  vast  workshop,  where  the  labour  of  each, 
however  diverse  in  character,  adds  to  the  wealth  of  all.  The  passage 
in  which  Adam  Smith  expresses  this  idea  is  well  known,  but  no 
apology  is  needed  for  quoting  it  once  again.1  "  What  a  variety  of 
labour  too  is  necessary  in  order  to  produce  the  tools  of  the  meanest 
of  those  workmen  !  To  say  nothing  of  such  complicated  machines 
as  the  ship  of  the  sailor,  the  mill  of  the  fuller,  or  even  the  loom  of 
the  weaver,  let  us  consider  only  what  a  variety  of  labour  is  requisite 
in  order  to  form  that  very  simple  machine,  the  shears  with  which 
the  shepherd  clips  the  wool.  The  miner,  the  builder  of  the  furnace 
for  smelting  the  ore,  the  feller  of  the  timber,  the  burner  of  the 
charcoal  to  be  made  use  of  in  the  smelting-house,  the  brick-maker, 
the  brick-layer,  the  workmen  who  attend  the  furnace,  the  mill-wright, 
the  forger,  the  smith,  must  all  of  them  join  their  different  arts  in 
order  to  produce  them.  Were  we  to  examine,  in  the  same  manner, 
all  the  different  parts  of  his  dress  and  household  furniture,  the 
coarse  linen  shirt  which  he  wears  next  his  skin,  the  shoes  which 
cover  his  feet,  the  bed  which  he  lies  on,  and  all  the  different  parts 
which  compose  it,  the  kitchen-grate  at  which  he  prepares  his  victuals, 
the  coals  which  he  makes  use  of  for  that  purpose,  dug  from  the  bowels 
of  the  earth,  and  brought  to  him  perhaps  by  a  long  sea  and  a  long 
land  carriage,  all  the  other  utensils  of  his  kitchen,  all  the  furniture 
of  his  table,  the  knives  and  forks,  the  earthen  or  pewter  plates  upon 
which  he  serves  up  and  divides  his  victuals,  the  different  hands 
employed  in  preparing  his  bread  and  his  beer,  the  glass  window 
which  lets  in  the  heat  and  the  light,  and  keeps  out  the  wind  and  the 
rain,  with  all  the  knowledge  and  art  requisite  for  preparing  that 
beautiful  and  happy  invention,  without  which  these  northern  parts 
of  the  world  could  scarce  have  afforded  a  very  comfortable  habita- 
tion, together  with  the  tools  of  all  the  different  workmen  employed 
in  producing  those  different  conveniences  ;  if  we  examine,  I  say, 
1  Wealth  of  Nations,  Book  I,  chap.  1 ;  Carman,  vol.  i,  pp.  13-14. 

E.D.  C 


58  ADAM  SMITH 

all  these  things,  and  consider  what  a  variety  of  labour  is  employed 
about  each  of  them,  we  shall  be  sensible  that  without  the  assistance 
and  co-operation  of  many  thousands,  the  very  meanest  person  in  a 
civilized  country  could  not  be  provided,  even  according  to,  what  we 
very  falsely  imagine,  the  easy  and  simple  manner  in  which  he  is 
commonly  accommodated." 

Division  of  labour  is  simply  the  spontaneous  realisation  of  a 
particular  form  of  this  social  co-operation.  Smith's  peculiar  merit 
lies  in  placing  this  fact  in  its  true  position  as  the  basis  of  his  whole 
work.  The  book  opens  upon  this  note,  whose  economic  and  social 
importance  has  been  so  frequently  emphasised  since  that  it  sounds 
almost  commonplace  to-day. 

This  division  of  labour  effects  an  easy  and  natural  combination 
of  economic  efforts  for  the  creation  of  the  national  dividend.  Whereas 
animals  confine  themselves  to  the  direct  satisfaction  of  their  indi- 
vidual needs,1  men  produce  commodities  to  exchange  them  for  others 
more  immediately  desired.  Hence  there  results  for  the  community 
an  enormous  increase  of  wealth ;  and  division  of  labour,  by  establish- 
ing the  co-operation  of  all  for  the  satisfaction  of  the  desires  of  each, 
becomes  the  true  source  of  progress  and  of  well-being. 

In  order  to  illustrate  the  growth  in  total  production  as  the 
outcome  of  division  of  labour,  Smith  gives  an  example  of  its  effects 
in  a  particular  industry.  '*  The  effects  of  the  division  of  labour,  in 
the  general  business  of  society,  will  be  more  easily  understood  by 
considering  in  what  manner  it  operates  in  some  particular  manu- 
factures." It  is  in  this  connection  that  he  introduces  his  celebrated 
description  of  the  manufacture  of  pins.  "  A  workman  not  educated 
to  this  business  (which  the  division  of  labour  has  rendered  a  distinct 
trade),  nor  acquainted  with  the  use  of  the  machinery  employed  in  it 
(to  the  invention  of  which  the  same  division  of  labour  has  probably 
given  occasion),  could  scarce,  perhaps,  with  his  utmost  industry,  make 
one  pin  in  a  day,  and  certainly  could  not  make  twenty.  But  in  the 
way  in  which  this  business  is  now  carried  on,  not  only  the  whole 
work  is  a  peculiar  trade,  but  it  is  divided  into  a  number  of  branches, 
of  which  the  greater  part  are  likewise  peculiar  trades.  One  man 
draws  out  the  wire,  another  straights  it,  a  third  cuts  it,  a  fourth 
points  it,  a  fifth  grinds  it  at  the  top  for  receiving  the  head  ;  to  make 
the  head  requires  two  or  three  distinct  operations ;  to  put  it  on,  is  a 

1  "  In  almost  every  other  race  of  animals  each  individual,  when  it  is  grown  up 
to  maturity,  is  entirely  independent,  and  in  its  natural  state  has  occasion  for  the 
assistance  of  no  other  living  creature."  (Wealth  of  Natiuna,  Book  I,  chap.  2  ; 
Carman,  vol.  i,  p,  16.) 


DIVISION  OF  LABOUR  59 

peculiar  business,  to  whiten  the  pins  is  another ;  it  is  even  a  trade 
by  itself  to  put  them  into  the  paper  ;  and  the  important  business  of 
making  a  pin  is,  in  this  manner,  divided  into  about  eighteen  distinct 
operations,  which,  in  some  manufactories,  are  all  performed  by 
distinct  hands,  though  in  others  the  same  man  will  sometimes 
perform  two  or  three  of  them.  I  have  seen  a  small  manufactory  of 
this  kind  where  ten  men  only  were  employed,  and  where  some  of 
them  consequently  performed  two  or  three  distinct  operations.  But 
though  they  were  very  poor,  and  therefore  but  indifferently  accom- 
modated with  the  necessary  machinery,  they  could,  when  they 
exerted  themselves,  make  among  them  about  twelve  pounds  of  pins 
in  a  day."  1 

Such  is  the  picture  of  man  as  we  find  him  in  society.  Division 
of  labour  and  exchange  have  resulted  in  augmenting  production 
a  hundredfold,  and  thus  increasing  his  well-being,  whereas  left  to 
himself  he  could  scarcely  supply  his  most  urgent  needs. 

In  a  subsequent  analysis  Smith  ascribes  the  gain  resulting  from 
division  of  labour  to  three  principal  causes  :  (1)  The  greater  dexterity 
acquired  by  each  workman  when  confined  to  one  particular  task  ; 
(2)  the  economy  of  time  achieved  in  avoiding  constant  change 
of  occupation  ;  (3)  the  number  of  inventions  and  improvements 
which  suggest  themselves  to  men  absorbed  in  one  kind  of  work. 

Criticism  has  been  levelled  at  Smith  for  his  omission  to  mention 
the  disadvantages  of  division  of  labour  which  might  possibly  counter- 
balance its  many  advantages.  The  omission  is  the  result  of  his 
method  of  treating  the  whole  question,  and  it  is  not  of  much 
real  importance.  The  disadvantages,  moreover,  were  not  altogether 
lost  sight  of,  and  it  would  be  difficult  to  find  a  more  eloquent  plea 
for  some  counteracting  influence  than  that  which  Smith  puts  forward 
in  the  fifth  book  of  the  Wealth  of  Nations.  "  In  the  progress  of  the 
division  of  labour,"  he  remarks,  "  the  employment  of  the  far  greater 
part  of  those  who  live  by  labour,  that  is,  of  the  great  body  of  the  people, 
comes  to  be  confined  to  a  few  very  simple  operations  ;  frequently  to 
one  or  two."  But  **  the  man  whose  whole  life  is  spent  in  performing 
a  few  simple  operations,  of  which  the  effects  too  are,  perhaps,  always 
the  same,  or  very  nearly  the  same,  has  no  occasion  to  exert  his 
understanding,  or  to  exercise  his  invention  in  finding  out  expedients 
for  removing  difficulties  which  never  occur.  He  naturally  loses, 
therefore,  the  habit  of  such  exertion,  and  generally  becomes  as  stupid 
and  ignorant  as  it  is  possible  for  a  human  creature  to  become."  a 

1  Wealth  of  Nations,  Book  1,  chap.  1 ;  Oannan,  vol.  i,  p.  6. 
*  Ibid.,  Book  V,  chap,  i,  pur    iii,  art.  2  ;   vol.  ii,  p.  207. 


60  ADAM  SMITH 

This  passage  seems  in  contradiction  with  the  ideas  expressed 
above.  At  one  moment  constant  application  to  one  particular  kind 
of  work  is  regarded  as  the  mother  of  invention,  at  another  the 
unremitting  task  is  branded  as  a  fertile  cause  of  stupefaction.  The 
contradiction  is,  however,  more  apparent  than  real.  An  occupation 
at  first  stimulating  to  the  imagination  may,  if  constantly  pursued, 
result  in  mental  torpor.  Smith's  conclusions  are  at  any  rate  interest- 
ing. In  order  to  remove  the  inconveniences  resulting  from  over- 
specialisation  he  emphasises  the  need  for  bringing  within  reach  of 
the  people,  even  of  imposing  upon  them,  a  system  of  education 
consisting  of  the  three  R's  1 — such  education  to  be  supplied  through 
institutions  partly  supported  by  the  State.  We  can  imagine  the 
shock  which  such  heterodoxy  must  have  given  to  the  prophets  of 
laissez-faire.  Fortunately  it  was  not  the  only  one  they  had  to 
bear. 

Smith  next  proceeds  to  indicate  the  limits  of  this  division  of 
labour.  Of  such  limits  he  mentions  two :  (1 )  In  the  first  place  it 
must  be  limited  by  the  extent  of  the  market.  "  When  the  market 
is  very  small,  no  person  can  have  any  encouragement  to  dedicate 
himself  entirely  to  one  employment,  for  want  of  the  power  to  exchange 
all  that  surplus  part  of  the  produce  of  his  own  labour,  which  is  over 
and  above  his  own  consumption,  for  such  parts  of  the  produce  of 
other  men's  labour  as  he  has  occasion  for."  2  This  is  why  foreign 
trade,  including  trade  with  the  colonies,  by  extending  the  market 
for  some  products  is  favourable  to  further  division  of  labour  and 
a  further  increase  of  wealth.  (2)  The  other  consideration  which, 
according  to  Smith,  limits  division  of  labour  is  the  quantity  of  capital 
available.8  The  significance  of  this  observation  is  not  quite  so 
obvious  as  that  of  the  former  one.  Here  it  seems  to  us  that  a 
conclusion  drawn  from  one  particular  trade  has  been  applied  to 
industry  as  a  whole.  It  may  be  true  of  a  private  manufacturer  that 

1  "  For  a  very  small  expence  the  public  can  facilitate,  can  encourage,  and  can 
even  impose  upon  almost  the  whole  body  of  the  people,  the  necessity  of  acquiring 
those  most  essential  parts  of  education."  (Wealth  of  Nations,  Book  V,  chap.  1, 
part  iii,  art.  2  ;  Cannan,  vol.  ii,  p.  270.) 

1  Ibid.,  Book  I,  chap.  3  ;  vol.  i,  p.  19. 

1  "  As  the  accumulation  of  stock  must,  in  the  nature  of  things,  be  previous  to 
the  division  of  labour,  so  labour  can  be  more  and  more  subdivided  in  proportion 
only  as  stock  is  previously  more  and  more  accumulated."  (Ibid.,  Book  II, 
Introd.  ;  vol.  i,  p.  259.)  It  is  true  that  in  another  passage  he  speaks  of  the 
quantity  of  stock  which  can  be  employed  in  any  branch  of  business  depending 
very  much  upon  that  of  the  labour  which  can  be  employed  in  it  (Book  I,  chap.  10, 
part  ii ;  vol.  i,  p.  1 37).  But  this  observation  remains  isolated,  while  the  former 
represents  his  true  teaching. 


DIVISION  OF  LABOUR  61 

he  will  be  able  to  push  technical  division  of  labour  further  than  any 
of  his  rivals  provided  he  has  more  capital  than  they ;  but  taking 
society  as  a  whole  it  is  clear  that  the  existence  of  division  of  labour 
enables  the  same  product  to  be  produced  with  less  capital  than  is 
necessary  for  the  single  producer.1 

Such  is  an  outline  of  Adam  Smith's  theory  of  division  of  labour — 
a  theory  so  familiar  to  everyone  to-day  that  we  are  often  unable  to 
realise  its  importance  and  to  appreciate  its  originality,  and  this 
despite  the  fact  that  certain  sociologists  like  Durkheim  have 
hailed  it  as  supplying  the  basis  of  a  new  ethic.  Juxtaposed 
with  the  Physiocratic  theory,  it  is  not  very  difficult  to  realise  its 
superiority. 

To  the  Physiocrats  the  economic  world  was  a  hierarchy  of  classes. 
The  agriculturist  in  some  mysterious  way  bore  the  "  whole  weary 
weight  of  this  unintelligible  world  "  upon  his  own  shoulders,  giving 
to  the  other  classes  a  modicum  of  that  sustenance  which  he  had 
wrested  from  the  soil.  Hence  the  fundamental  importance  of  the  agri- 
cultural classes  and  the  necessity  for  making  the  whole  economic  system 
subordinate  to  them.  Adam  Smith,  on  the  other  hand,  attempted 
to  get  a  view  of  production  as  a  whole.  He  regarded  it  as  the  result 
of  a  series  of  joint  undertakings  engineered  by  the  various  sections 
of  society  and  linked  together  by  the  tie  of  exchange.  The  progress 
of  each  section  is  bound  up  with  that  of  every  other.  To  none  of 
these  classes  is  entrusted  the  task  of  keeping  all  the  others  alive  ;  all 
are  equally  indispensable.  The  artisan  who  spares  the  labourer  the 
task  of  building  his  house  or  of  making  his  shoes  contributes  to  the 
accumulation  of  agricultural  products  just  as  much  as  the  ploughman 
who  frees  the  artisan  from  turning  the  furrow  or  sowing  the  seed. 
The  progress  of  national  wealth  cannot  be  measured  in  terms  of  a 
single  net  product ;  it  must  be  estimated  by  the  increase  in  the 
whole  mass  of  commodities  placed  at  the  disposal  of  consumers. 

One  very  evident  practical  conclusion  follows;  namely,  that 
taxation  should  fall,  not  upon  one  class,  as  the  Physiocrats  wished, 
but  upon  all  classes  alike.  As  against  the  impot  unique,  Smith 
advocates  multiple  taxation  which  shall  strike  every  source  of 
revenue  equally,  labour  and  capital  as  well  as  land  ;  and  the  funda- 
mental rule  which  he  lays  down  is  as  follows  :  "  The  subjects  of 
every  State  ought  to  contribute  towards  the  support  of  the  Govern- 
ment, as  nearly  as  possible,  in  proportion  to  their  respective  abilities  ; 
that  is,  in  proportion  to  the  revenue  which  they  respectively  enjoy 

1  Cf.  Carman's  penetrating  criticism  of  this  idea  of  Smith's  in  Theories  of 
Production  atid  Distribution,  pp.  80-83. 


62  ADAM  SMITH 

under  the  protection  of  the  State."  1    This  is  his  famous  maxim  of 
equality  so  frequently  quoted  in  every  financial  discussion.2 

It  is  very  curious  that  Smith  should  have  failed  to  make  the  best 
possible  use  of  this  theory.  Its  full  significance  was  lost  upon  him. 
The  theory  of  division  of  labour  alone  was  sufficient  to  dispose  of 
the  whole  Physiocratic  system.  Nevertheless,  in  the  last  chapter  of 
Book  IV  we  find  him  still  valiantly  struggling  to  disprove  the  con- 
clusions of  the  Physiocrats,  by  the  aid  of  arguments  not  always 
very  convincing.  Forgetting  his  principle  of  division  of  labour,  he 
even  adopts  a  part  of  their  thesis  and  finds  himself  entangled  by  the 
invalid  distinctions  which  they  had  drawn  between  productive  and 
unproductive  workers.  He  simply  gives  another  definition  and 
describes  as  unproductive  all  works  which  "  perish  in  the  very  instant 
of  their  performance,  and  seldom  leave  any  trace  or  value  behind 
them  for  which  an  equal  quantity  of  service  could  afterwards  be 
procured." 8  All  these  services,  which  comprise  the  labours  of 
domestic  servants,  of  administrators  and  magistrates,  of  soldiers  and 
priests,  of  counsellors,  doctors,  artists,  authors,  musicians,  etc.,  Say 
classed  together  as  "  immaterial  products."  By  restricting  the 
term  "  productive  "  to  material  objects  only,  Smith  gave  rise  to  a  very 
useless  controversy  on  the  nature  of  productive  and  unproductive 
works — a  controversy  that  was  first  taken  up  by  Say  and  revived 
by  Mill,  but  which  to-day  seems  to  be  decided  against  Smith, 
thanks  to  a  more  exact  interpretation  of  his  own  doctrines.  It  is, 
indeed,  quite  clear  that  all  these  services  constitute  a  part  of  the 

1  This  is  the  first  of  the  four  celebrated  maxims  enunciated  by  Smith  in  his 
theory  of  taxation.  Here  are  the  other  three :  "  (ii)  The  tax  which  each  individual 
is  bound  to  pay  ought  to  be  certain  and  not  arbitrary.  The  time  of  payment, 
the  manner  of  payment,  the  quantity  to  be  paid,  ought  all  to  be  clear  and  plain 
to  the  contributor,  and  to  every  other  person,  (iii)  Every  tax  ought  to  be  levied 
at  the  time,  or  in  the  manner,  in  which  it  is  most  likely  to  be  convenient  for  the 
contributor  to  pay  it.  (iv)  Every  tax  ought  to  be  so  contrived  as  both  to  take 
out  and  to  keep  out  of  the  pockets  of  the  people  as  little  as  possible,  over  and 
above  what  it  brings  into  the  public  treasury  of  the  State."  ( Wealth  of  Nations, 
Book  V,  chap.  2,  part  ii  ;  Carman,  vol.  ii,  pp.  310-311.) 

*  This  rule  of  payment  according  to  ability  did  not  prevent  his  pronouncing 
in  another  paragraph  in  favour  of  progressive  taxation.  This  is  an  instance  of 
a  want  of  logic  frequently  evidenced  in  his  writings.  Speaking  of  taxes  upon 
rent,  he  remarks  that  they  weigh  more  heavily  upon  rich  than  upon  poor,  because 
the  former  in  proportion  to  their  income  spend  more  upon  house  rent  than  the 
latter.  But  "  it  is  not  very  unreasonable  that  the  rich  should  contribute  to 
the  public  expence,  not  only  in  proportion  to  their  revenue,  but  something 
more  than  in  that  proportion."  (Ibid.,  "Book  V,  chap.  2,  part  ii,  art.  1  ;  vol.  ii, 
p.  327.) 

1  Ibid.,  Book  II,  chap.  3  ;  vol.  i,  p.  314. 


DIVISION  OF  LABOUR  63 

annual  revenue  of  the  nation,  and  that  "  production  "  in  a  general 
sense  would  be  diminished  if  some  persons  did  not  exclusively 
devote  themselves  to  the  performance  of  such  tasks. 

After  criticising  the  Physiocratic  distinction  drawn  between  the 
wage-earning  classes  and  the  productive,  Smith  immediately  admits 
that  the  labour  of  artisans  and  traders  is  not  as  productive  as  that 
of  farmers  and  agricultural  labourers,  for  the  latter  not  only  return 
the  capital  employed  by  them  together  with  profits,  but  they  also 
furnish  the  proprietor  with  rent.1 

Whence  this  hesitation  on  the  part  of  Smith  ?  Where  did  he 
come  by  the  idea  of  the  special  and  superior  productivity  of  agricul- 
ture ?  An  attempt  to  account  for  it  may  prove  interesting,  and  it 
will  help  us  to  give  Smith  his  true  place  in  a  history  of  economic 
doctrines. 

Notwithstanding  his  recantation,  Smith  was  never  quite  rid 
of  Physiocratic  influence.  Writing  of  the  Physiocratic  system,  he 
described  it  as  perhaps  "  the  nearest  approximation  to  the  truth 
that  has  yet  been  published."  2  So  indelible  was  the  impression 
which  the  Physiocrats  left  upon  him  that  both  they  and  their  doc- 
trines, even  when  the  latter  are  directly  opposed  to  his  own,  are 
always  spoken  of  with  the  greatest  respect.  The  most  important 
evidence  of  their  power  over  him  is  the  thesis  just  mentioned  which 
he  attempted  to  defend,  namely,  that  between  agriculture  and  other 
industries  lies  an  essential  distinction,  because  in  industry  and 
commerce  the  forces  of  nature  are  never  brought  into  play,  whereas 
in  agriculture  they  always  collaborate  with  man.  "  No  equal  quan- 
tity of  productive  labour  employed  in  manufactures  can  ever  occasion 
so  great  a  reproduction.  In  them  nature  does  nothing  ;  man  does 
all ;  and  the  reproduction  must  always  be  in  proportion  to  the 
strength  of  the  agents  that  occasion  it."  8  We  almost  think  we 
are  dreaming  when  we  read  such  things  in  the  work  of  a  great  econo- 
mist. Water,  wind,  electricity,  and  steam,  are  they  not  natural 
forces,  and  do  they  not  co-operate  with  man  in  his  task  of  production  ? 

*  "  Fanners  and  country  labourers,  indeed,  over  and  above  the  stock  which 
maintains  and  employs  them,  reproduce  annually  a  neat  produce,  a  free  rent  to 
the  landlord.     As  a  marriage  which  affords  three  children  is  certainly  more 
productive  than  one  which  affords  only  two ;    so  the  labour  of  farmers  and 
country  labourers  is  certainly  more  productive  than  that  of  merchants,  artificers, 
and  manufacturers.     The  superior  produce  of  the  one  class,  however,  does  not 
render  the  other  barren  or  urpro  Inctive."   (Wealth  of  Nations,  Book  IV,  chap.  9 ; 
Cannan,  vol.  ii,  p.  173.) 

*  Ibid.,  Book  IV,  chap.  9  ;  vol.  ii,  p.  176. 
»  Ibid.,  Book  II,  chap.  6  ;  vol.  i,  p.  344. 


64  ADAM  SMITH 

Considerations  such  as  these  were  allowed  to  pass  quite  unheeded, 
and  Smith  persisted  in  his  error  because  he  believed  that  this  new 
doctrine  furnished  him  with  an  explanation  of  rent,  that  strange 
enigma  which  had  puzzled  English  economists  for  so  long.  How  was 
it  that  while  other  branches  of  production  gave  a  return  only  suffi- 
cient to  remunerate  the  capital  and  labour  employed,  agriculture,  in 
addition  to  these  two  revenues,  yielded  a  supplementary  income 
known  as  rent  ?  It  was  because  "  in  agriculture  nature  labours 
along  with  man  :  and  though  her  labour  costs  no  expence,  its 
produce  has  its  value  as  well  as  that  of  the  most  expensive  workman." 
Thus  "  rent  may  be  considered  as  the  produce  of  those  powers  of 
nature,  the  use  of  which  the  landlord  lends  to  the  farmer."  l  Had 
Smith  arrived  at  a  true  theory  of  rent  this  recourse  to  the  natural 
powers  of  the  soil  to  furnish  an  explanation  of  the  proprietor's 
revenue  would  have  been  quite  unnecessary,  and  in  all  probability 
he  would  not  have  so  easily  accepted  the  idea  of  the  special  produc- 
tivity of  the  soil.  But  this  false  conception  of  nature  has  persisted 
in  economic  theory,  and  in  it  Smith  thought  he  saw  an  additional 
reason  for  adhering  to  those  errors  which  the  Physiocrats  had  first 
induced  him  to  commit.2 

1  Wealth  of  Nations,  Book  II,  chap.  5  ;  Carman,  vol.  i,  p.  344.  Note  that 
here  as  elsewhere  Smith  entertains  more  than  one  opinion.  In  other  passages 
in  the  book  he  regards  rent  as  a  monopoly  price  "  that  enters  into  the  composition 
of  the  price  of  commodities  in  a  different  way  from  wages  and  profit.  High  or 
low  wages  and  profit,  are  the  causes  of  high  or  low  price  ;  high  or  low  rent  is 
the  effect  of  it.  It  is  because  high  or  low  wages  and  profit  must  be  paid,  in 
order  to  bring  a  particular  commodity  to  market,  that  its  price  is  high  or  low. 
But  it  is  because  its  price  is  high  or  low  ;  a  great  deal  more,  or  very  little  more, 
or  no  more,  than  what  is  sufficient  to  pay  those  wages  and  profit,  that  it  affords 
a  high  rent,  or  a  low  rent,  or  no  rent  at  all."  (Ibid.,  Book  I,  chap.  11  ;  vol.  i, 
p.  147.) 

It  is  impossible  to  reconcile  these  statements.  In  the  one  case  rent  is  regarded 
as  a  constituent  element  of  price,  in  the  other  it  is  the  effect  of  price. 

In  the  first  edition  this  contradiction  was  still  more  evident.  In  that  edition 
rent,  along  with  profit  and  wages,  was  treated  as  a  third  determinant  of  value. 
(See  Caiman's  edition,  vol.  i,  p.  51,  note  7.)  The  paragraph  was  deleted  from  the 
second  edition,  and  rent  was  treated  merely  as  a  component  part  of  the  price. 
This  modification  was  perhaps  the  outcome  of  a  letter  written  by  Hume  to  Smith 
on  April  1,  1776,  after  he  had  read  the  Wealth  of  Nations  for  the  first  time.  "  I 
cannot  think,"  says  Hume,  "  that  the  rent  of  farms  makes  any  part  of  the  price 
of  the  produce,  but  that  the  price  is  determined  altogether  by  the  quantity  and 
the  demand."  (Quoted  by  Bae  in  his  Life  of  Adam  Smith,  p.  286.)  The  cele- 
brated controversy  as  to  whether  rent  enters  into  prices  is  not  a  thing  of  yesterday. 
Its  origin  dates  from  the  birth  of  political  economy  iteelf,  and  it  will  probably 
only  die  with  it. 

*  His  error  is  partly  due  to  the  fact  that  he  failed  to  distinguish  between 
the  profits  of  the  entrepreneur  and  the  interest  of  the  capitalist.  Both  with 


DIVISION  or  LABOUR  65 

Apart  from  his  personal  attachment  to  the  Physiocrats  we  must 
also  remember  that  Smith  more  than  shared  their  predilection  for 
agriculture. 

Nothing  can  be  more  incorrect,  though  it  is  frequently  done, 
than  to  regard  Smith  as  the  prophet  of  industrialism  and  to  contrast 
him  with  the  Physiocrats,  the  champions  of  agriculture.  When  the 
Wealth  of  Nations  appeared  in  1776  the  economic  transformation 
known  to  history  as  the  Industrial  Revolution,  which  consisted 
in  the  rapid  substitution  of  machine  production  for  the  old  domestic 
regime,  had  as  yet  scarcely  begun.  Hargreaves  and  Arkwright 
had  doubtless  some  inventions  to  their  credit.  The  one  had  pro- 
duced the  spinning  jenny  in  1765,  and  the  other  had  perfected 
the  water  frame  in  1767,  improvements  that  had  given  considerable 
impetus  to  the  cotton  trade.  James  Watt,1  who  was  known  to 
Smith,  took  out  a  patent  for  a  steam-engine  in  1769.  But  these 
inventions  were  as  yet  quite  novel,  and  required  time  before  they 
could  modify  the  industrial  system.  The  more  important  among 
them,  Crompton's  "  mule "  2  and  Cartwright's  weaving  machine, 
were  as  yet  of  the  future.  These  dates  are  significant ;  they  prove 
conclusively  that  the  Industrial  Revolution  had  scarcely  begun  when 
Smith's  great  work  appeared.  Moreover,  several  of  the  more 
important  themes  treated  of  in  the  Wealth  of  Nations  may  be  dis- 
covered in  the  course  of  lectures  which  Smith  delivered  at  Glasgow 
about  1759,  so  that  it  is  quite  impossible  to  establish  anything  like 
an  exact  connection  between  the  Industrial  Revolution  which  was 
just  beginning  and  the  ideas  embodied  in  the  Wealth  of  Nations. 
One  cannot  even  say  that  Smith  was  particularly  enamoured  of  the 

Smith  and  with  his  successors  th"  word  "  profit  "  signified  a  twofold  revenue,  and 
this  was  perfectly  correct  so  long  as  the  entrepreneur  was  also  a  capitalist.  The 
word  "  interest  "  was  reserved  for  the  income  of  that  person  who  lent  capital  but 
who  did  not  himself  produce  anything.  The  revenue  "  derived  from  stock, 
by  the  person  who  manages  or  employs  it,  is  called  profit.  That  derived  from  it 
by  the  person  who  does  not  employ  it  himself,  but  lends  it  to  another,  is  called  the 
interest  or  the  use  of  money."  (Ibid.,  Book  I,  chap.  6  ;  vol.  i,  p.  54.)  J.  B.  Say 
was  the  first  to  give  us  a  definite  idea  of  the  entrepreneur.  Had  Smith  realised 
more  clearly  the  functions  of  the  entrepreneur  he  would  probably  have  perceived : 
(1)  That  the  entrepreneur,  in  addition  to  paying  interest  on  his  capital,  frequently 
has  to  pay  rent  for  the  use  of  the  soil ;  (2)  that  profit  strictly  so  called  includes 
an  element  analogous  to  rent.  According  to  Smith,  profit  was  simply  payment 
for  risks  undergone  or  for  work  undertaken. 

1  James  Watt  in  1756  had  set  up  his  workshop  within  the  precincts  of  the 
University  of  Glasgow,  for  which  he  manufactured  mathematical  instruments. 
The  corporation  had  refused  him  permission  to  set  it  up  in  the  town — a  striking 
.llustration  of  the  narrowness  and  inflexibility  of  "  the  corporative  regime." 

1  A  combination  of  Hargreave's  spinning  jenny  and  Arkwright's  water  frame. 

E.D.  0' 


60  ADAM  SMITH 

manufacturing  regime — apart  from  the  mechanical  advance  which  it 
implied.  For,  as  Marx  says,1  the  characteristic  trait  of  English 
economic  life,  despite  the  undisputed  advance  that  industry  was 
making  at  that  time,  was  commercial  rather  than  industrial.* 
Especially  was  this  true  of  Glasgow,  where  Smith  made  most  of  his 
observations.  Glasgow  then  was  an  essentially  commercial  town, 
principally  engaged  in  the  importation  of  American  tobacco.3 

Far  from  constituting  a  prophetic  manifesto  of  the  new  age, 
Smith's  work  reveals  even  to  the  most  superficial  reader  a  thorough 
abhorrence  of  traders  and  manufacturers.  All  his  sarcasm  is 
reserved  for  them,  all  his  criticism  levelled  at  them.  While  the 
interest  of  landed  proprietors  and  workers  appears  to  him  always  to 
accord  with  a  country's  general  interest,  that  of  traders  and  manu- 
facturers **  is  never  exactly  the  same  with  that  of  the  public,"  the 
manufacturers  having  "  generally  an  interest  to  deceive  and  even 
to  oppress  the  public,  and  who  accordingly  have,  upon  many 
occasions,  both  deceived  and  oppressed  it."  * 

Again,  when  it  comes  to  choosing  between  capitalists  and  work- 
men the  issue  is  not  long  in  doubt.  It  is  quite  clear  from  more 
than  one  passage  that  Smith's  sympathy  was  wholly  with  the  workers. 
Several  paragraphs  could  be  cited  in  proof  of  this.  Suffice  it  to 
recall  the  very  sympathetic  way  in  which  he  speaks  of  the  high 
wages  of  workmen  and  contrast  it  with  his  discussion  of  profits.  "  Is 
this  improvement  in  the  circumstances  of  the  lower  ranks  of  the 
people  to  be  regarded  as  an  advantage  or  as  an  inconveniency  to 
the  society?  The  answer  seems  at  first  sight  abundantly  plain. 
Servants,  labourers  and  workmen  of  different  kinds,  make  up  the 
far  greater  part  of  every  great  political  society.  But  what  improves 
the  circumstances  of  the  greater  part  can  never  be  regarded  as  an 
inconveniency  to  the  whole.  No  society  can  surely  be  flourishing 
and  happy,  of  which  the  far  greater  part  of  the  members  are  poor 
and  miserable.  It  is  but  equity,  besides,  that  they  who  feed, 

1  Marx  speaks  of  Smith  as  the  economist  who  is  the  very  epitome  of  the 
manufacturing  period.  (Das  Kapital,  vol.  i,  p.  313,  note.) 

1  See  Mantoux'  work,  La  Revolution  industrielle  au  XVIII'  Siede,  p.  75 
(Paris,  1905).  "We  are  mistaken,"  says  he,  "if  we  think  that  manufacture 
was  the  dominant  feature  of  the  period  preceding  the  factory  system.  Logically 
it  may  be  the  necessary  antecedent,  but  historically  its  claim  to  priority  is  weak, 
although  it  left  its  indelible  marks  upon  industry.  The  appearance  of  industry 
at  the  time  of  the  Renaissance  is  an  event  of  the  greatest  importance  and  signifi- 
cance, but  it  only  played  a  part  of  secondary  importance  for  a  century  or  two." 

•  Rae's  Life  of  Adam  Smith,  p.  89. 

•  Wealth  of  Nations,  Book  I,  chap.  11  ;  Cannan,  vol.  i,  p.  250. 


DIVISION  OF  LABOUR  67 

cloath,  and  lodge  the  whole  body  of  the  people,  should  have 
such  a  share  of  the  produce  of  their  own  labour  as  to  be  themselves 
tolerably  well  fed,  cloathed,  and  lodged."  *  The  tune  changes  when 
he  comes  to  speak  of  profits.  He  is  of  opinion  that  high  profits 
raise  the  price  of  commodities  much  more  than  high  wages,  and  he 
dismisses  the  consideration  of  the  problem  with  this  ironical  remark  : 
"  Our  merchants  and  master-manufacturers  complain  much  of  the 
bad  effects  of  high  wages  in  raising  the  price,  and  thereby  lessening 
the  sale  of  their  goods  both  at  home  and  abroad.  They  say  nothing 
concerning  the  bad  effects  of  high  profits.  They  are  silent  with 
regard  to  the  pernicious  effects  of  their  own  gains.  They  complain 
only  of  those  of  other  people."  a  The  contrast  is  significant.  It  is 
still  more  deeply  marked  in  that  phrase  which  one  is  surprised  not 
to  see  more  frequently  quoted  by  the  champions  of  labour  legislation. 
"  Whenever  the  legislature  attempts  to  regulate  the  differences 
between  masters  and  their  workmen,  its  counsellors  are  always  the 
masters.  When  the  regulation,  therefore,  is  in  favour  of  the  work- 
men, it  is  always  just  and  equitable ;  but  it  is  sometimes  otherwise 
when  in  favour  of  the  masters."  3 

This  is  not  the  tone  of  most  of  his  contemporaries.  Nor  do  we 
meet  with  this  note  m  the  writings  of  the  appointed  champions  of 
the  industrial  system — the  MacCullochs,  the  Ures,  and  the  Babbages 
of  the  next  fifty  years.  His  words  ring  with  that  generous  pity  which 
proved  a  source  of  inspiration  to  Lord  Shaftesbury  and  Michael  Sadler 
in  their  efforts  to  secure  the  passing  of  the  Factory  Act  of  1833. 

Smith  cannot,  accordingly,  be  regarded  as  the  herald  of  dawning 
industrialism.  He  clung  to  agriculture  with  all  the  tenacity  of  his 
nature,  and  no  opportunity  of  showing  his  preference  was  ever 
missed.  The  difficulties  of  agriculture  are  quite  beyond  those  of 
any  other  craft.  "  After  what  are  called  the  fine  arts,  and  the  liberal 
professions,  however,  there  is  perhaps  no  trade  which  requires  so 
great  a  variety  of  knowledge  and  experience."  *  Not  only  is  it  more 
difficult,  but  it  is  also  more  useful.  Between  agriculture,  manu- 
facture, and  commerce  he  draws  a  long  comparison  (to  which  we 
shall  have  to  make  reference  again)  purporting  to  show  that  of  all 
employments  agriculture  is  the  most  profitable  field  of  investment, 
and  the  one  most  in  accord  with  the  general  interest.  For  the  more 

1  Wealth  of  Nations,  Book  I,  chap.  8  ;   Cannan,  vol.  i,  p.  80, 
1  Ibid.,  Book  I,  chap.  9,  in  fine  ;  vol.  i,  p.  100. 
r  Ibid.,  Book  I,  chap.  10,  part  ii ;  vol.  i,  p.  143. 

4  Ibid.,  Book  I,  chap.  10,  part  ii ;  vol.  i,  p.  128.  The  whole  passage  contains 
a  curious  eulogy  of  proprietors  and  farmers. 


68  ADAM  SMITH 

progressive  nations  **  the  natural  course  of  things  "  would  seem  to 
suggest  the  investment  of  capital  firstly  in  agriculture,  in  the  second 
place  in  industry,  and  finally  in  foreign  trade.  The  whole  of 
Book  III  is  an  endeavour  to  show  how  the  policy  of  European 
nations  had  for  many  centuries  been  hostile  to  agriculture  and  how 
the  natural  order  had  been  inverted  in  the  interests  of  merchants 
and  artisans.  Agriculture  had  always  been  the  victim.  In  his 
theory  of  taxation  he  shows  how  a  portion  of  the  taxes  on  profits 
and  wages  ultimately  falls  upon  property.  In  his  discussion  of 
duties  on  imported  corn — those  duties  which  aroused  the  indignation 
of  Ricardo  against  the  landlords — he  reveals  the  same  partiality.  And 
he  even  goes  the  length  of  saying  that  it  is  not  because  of  their 
personal  interest,  but  owing  solely  to  a  badly  conceived  imitation  of 
the  doings  of  merchants  and  manufacturers,  that  "the  country  gentle- 
men and  farmers  of  Great  Britain  so  far  forgot  the  generosity  which 
is  natural  to  their  station,  as  to  demand  the  exclusive  privilege  of 
supplying  their  countrymen  with  corn  and  butchers'-meat."  * 

Smith's  preference  for  agriculture  and  agriculturists  need  not  be 
further  insisted  upon.  Despite  his  own  theory  of  division  of  labour, 
he  still  cherished  a  secret  regard  for  the  Physiocratic  prejudice.  He 
never  subjected  agriculture  to  the  indignity  of  equal  treatment  along 
with  other  forms  of  economic  activity.  In  his  work  at  least  it  still 
retains  its  ancient  pre-eminence. 


II :  THE  "  NATURALISM  "  AND  "  OPTIMISM  "  OF 
SMITH 

IN  addition  to  the  conception  of  the  economic  world  as  a  great 
natural  community  created  by  division  of  labour,  we  can  distinguish 
in  Smith's  work  two  other  fundamental  ideas,  around  which  his 
more  characteristic  theories  group  themselves.  First  is  the  idea  of  the 
spontaneous  origin  of  economic  institutions,  and  secondly  their  bene- 
ficent character — or,  more  briefly,  Smith's  naturalism  and  optimism. 

The  two  ideas,  though  frequently  intermingled  and  sometimes 
even  confused  in  Smith's  work,  must  be  carefully  distinguished  by 
the  historian  of  economic  thought. 

Spontaneity  and  beneficence  were  intimately  connected  for  Smith. 
In  the  eighteenth  century  anything  natural  or  spontaneous  was 
immediately  voted  good,  and  the  terms  "  natural,"  "  just,"  and 
«'  advantageous  "  were  often  used  as  synonymous.  Smith  did  not 
escape  the  confusion  of  ideas.  Having  shown  the  natural  origin  of 
1  Wealth  of  Nations,  Book  IV,  chap.  2  ;  Cannan,  vol.  i,  p.  427. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       69 

economic  institutions,  he  imagined  that  at  the  same  time  he  had 
demonstrated  their  useful  and  beneficent  character.1  The  confusion 
is  no  longer  permissible.  To  give  a  scientific  demonstration  of  the 
origin  of  social  institutions  and  to  gauge  their  value  from  the  point  of 
view  of  the  general  interest  are  two  equally  legitimate  but  very 
different  intellectual  pursuits.  We  may  agree  with  Smith  that  our 
economic  organisations,  both  in  their  origin  and  functions,  participate 
of  thfe  spontaneity  of  natural  organisms,  but  we  may  at  the  same  time 
reserve  judgment  as  to  their  real  worth.  Pessimism  no  less  than 
optimism  may  be  engendered  by  contemplation  of  the  spontaneous 
character  of  economic  institutions.  While  this  conception  of  the 
spontaneity  of  economic  institutions  seems  to  us  just  and  fruitful, 
the  demonstration  given  of  their  beneficent  character  appears  in- 
sufficient and  doubtful.  The  former  conception  is  a  commonplace 
with  all  the  greatest  economists ;  the  latter  is  rejected  by  the 
majority  of  them. 

These  two  ideas  which  have  played  such  an  important  part  in 
the  history  of  economic  doctrines  must  be  separately  examined. 

The  conception  of  spontaneity  is  the  one  to  which  Smith  refers 
most  frequently.  II  mondo  va  da  se.  Here  at  any  rate  he  and  the 
Physiocrats  were  entirely  at  one.  There  is  no  need  for  organisation, 
no  call  for  the  intervention  of  any  general  will,  however  far-seeing 
or  reasonable,  and  no  necessity  for  any  preliminary  understanding 
between  men.  Such  are  the  reflections  that  the  study  of  the 
economic  world  suggests  ever  anew  to  our  author.  The  present 
aspect  of  the  economic  world  is  the  result  of  the  spontaneous  action 
of  millions  of  individuals,  each  of  whom  follows  his  own  sweet  will, 
taking  no  heed  of  others,  but  never  doubting  the  ultimate  result. 
The  noble  outlines  of  the  economic  world  as  we  know  it  have  been 
traced,  not  by  following  a  plan  issuing  complete  from  the  brain  of 
an  organiser  and  deliberately  carried  out  by  an  intelligent  society, 
but  by  the  accumulation  of  numberless  deeds  designed  by  a  crowd 
of  individuals  in  obedience  to  an  instinctive  force  wholly  unconscious 
of  the  work  which  it  was  encompassing. 

This  idea  of  the  spontaneous  constitution  of  the  economic  world 
is  in  some  aspects  analogous  to  the  conception  of  an  "  economic 
law  "  of  a  later  period.  Both  ideas  suggest  the  presence  of  something 
superior  to  individual  wills,  and  imposed  upon  them  even  despite 
their  resistance.  The  differences  are  equally  marked,  however,  the 

1  For  the  connection  between  Smith's  t  ystem  and  the  philosophy  of  his  time 
Bee  W.  Hasbach,  Die,  allgemeinen  philosophischen  Grumllagen  der  von  F.  Quesnai 
und  A.  Smith  begrdndtten  polilisdt&n  Oekonomie  (Leipzig,  1890). 


70  ADAM  SMITH 

scope  of  the  former  being  far  greater  than  that  of  the  latter.  The 
words  "  natural  law,"  in  the  first  place,  suggest  regularity  and  repeti- 
tion— the  constant  recurrence  of  the  same  phenomena  under  similar 
conditions.  This  is  not  the  aspect  that  particularly  struck  Smith. 
He  insists  less  upon  the  constancy  of  economic  phenomena  and  more 
on  their  spontaneity,  their  instinctive  and  natural  character.  Say's 
delight  was  to  compare  the  economic  and  the  physical  worlds. 
Smith  loves  to  regard  the  economic  world  as  a  living  organism  which 
creates  for  itself  its  own  indispensable  organs.  Nowhere  is  the  term 
"  economic  law"  employed,  but  his  delineation  of  the  chief  economic 
institutions  and  the  account  of  their  functions  always  results  in  the 
same  conclusion. 

First  of  all  take  division  of  labour,  which  we  have  just  studied, 
and  which  more  than  any  other  institution  contributes  to  the  increase 
of  wealth. 

This  marvellous  institution  is  "  not  originally  the  effect  of  any 
human  wisdom,  which  foresees  and  intends  that  general  opulence  to 
which  it  gives  occasion."  "  It  is  the  necessary,  though  very  slow 
and  gradual,  consequence  of  a  certain  propensity  in  human  nature 
which  has  in  view  no  such  extensive  utility ;  the  propensity  to 
truck,  barter,  and  exchange  one  thing  for  another."  1  This  tendency 
itself  is  the  outcome  of  personal  interest.  "  Man  has  almost  constant 
occasion  for  the  help  of  his  brethren,  and  it  is  in  vain  for  him  to 
expect  it  from  their  benevolence  only.  He  will  be  more  likely  to 
prevail  if  he  can  interest  their  self-love  in  his  favour,  and  show  them 
that  it  is  for  their  advantage  to  do  for  him  what  he  requires  of  them. 
Whoever  offers  to  another  a  bargain  of  any  kind,  proposes  to  do  this : 
Give  me  that  which  I  want,  and  you  shall  have  this  which  you  want, 
is  the  meaning  of  every  such  offer ;  and  it  is  in  this  manner  that 
we  obtain  from  one  another  the  far  greater  part  of  those  good  offices 
which  we  stand  in  need  of.  It  is  not  from  the  benevolence  of  the 
butcher,  the  brewer,  or  the  baker  that  we  expect  our  dinner,  but 
from  their  regard  to  their  own  interest.  We  address  ourselves,  not 
to  their  humanity,  but  to  their  self-love,  and  never  talk  to  them  of 
our  own  necessities,  but  of  their  advantages."  2  This  gives  rise  to 
exchange,  and  with  exchange  comes  division  of  labour.  "  And  thus 
the  certainty  of  being  able  to  exchange  all  that  surplus  part  of  the 
produce  of  his  own  labour,  which  is  over  and  above  his  own  consump- 
tion, for  such  parts  of  the  produce  of  other  men's  labour  as  he  may 

1  Wealth  of  Nations,  Book  I,  chap.  2  ;  Carman,  vol.  i,  p.  15. 
1  The  whole  passage,  almost  word  for  word,  may  be  found  in  Smith's  course  of 
lectures  at  Glasgow,  and  the  whole  is  taken  from  Mandeville'e  Fable  des  Abeille.s. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       71 

have  occasion  for,  encourages  every  man  to  apply  himself  to  a 
particular  occupation,  and  to  cultivate  and  bring  to  perfection 
whatever  talent  or  genius  he  may  possess  for  that  particular  species 
of  business."  Division  of  labour  is  the  outcome  of  a  tendency 
common  to  all  men,  the  tendency  to  barter  ;  and  this  tendency  itself 
is  spontaneously  developed  under  the  influence  of  personal  interest, 
which  acts  simultaneously  for  the  benefit  of  each  and  all. 

Next  comes  money,  and  nothing  has  so  facilitated  exchange  or 
so  greatly  increased  wealth.  Every  economic  treatise  since  Smith's 
has  demonstrated  its  advantages  in  terms  almost  identical  with  his. 
But  how  did  money  first  come  to  be  employed  T  It  was  not  by  the 
act  of  a  public  body,  nor  was  it  the  outcome  of  a  nation's  reflective 
judgment.  It  is  simply  the  result  of  the  operation  of  a  collective 
instinct.  Some  men  who  were  keener  than  others  saw  the  incon- 
veniences of  the  truck  system.  And  "  in  order  to  avoid  the  incon- 
veniency  of  such  situations,  every  prudent  man  in  every  period  of 
society,  after  the  first  establishment  of  the  division  of  labour,  must 
naturally  have  endeavoured  to  manage  his  affairs  in  such  a  manner, 
as  to  have  at  all  times  by  him,  besides  the  peculiar  produce  of  his 
own  industry,  a  certain  quantity  of  some  one  commodity  or  other, 
such  as  he  imagined  few  people  would  be  likely  to  refuse  in  exchange 
for  the  produce  of  their  industry."  1  Money  is  thus  the  product  of 
the  simultaneous  though  not  concerted  action  of  a  great  number 
of  people,  each  obeying  his  personal  inclination.  The  intervention 
of  the  public  authority  is  much  later,  and  its  object  is  merely  to 
guarantee  by  means  of  a  design  the  weight  and  purity  of  such  coins 
as  are  already  in  circulation. 

Take    another    well-known    phenomenon — capital.2    With    the 

1  Wealth  of  Nations,  Book  I,  chap.  4  ;  Canaan,  vol.  i,  p.  24. 

1  For  a  long  time  economists  were  quite  content  with  Smith's  theory  of 
capital.  Like  other  portions  of  his  work,  it  readily  became  classic,  and  sub- 
sequent writers  simply  repeated  it.  To-day,  however,  this  success  hardly  seems 
to  have  been  warranted.  "  It  can  scarcely  be  denied,"  writes  Cannan,  "  that 
Smith  left  the  whole  subject  of  capital  in  the  most  unsatisfactory  state." 
(Theories  of  Production  and  Distribution,  p.  89.)  If  this  remark  needs  any 
justification  we  have  it  in  the  many  discussions  which  have  taken  place  on  this 
subject  during  the  last  fifty  years,  and  which  are  not  yet  at  an  end.  Some  of 
the  most  original  works  of  recent  years,  Bohm-Bawerk's  Positive  Theory  of 
Capital,  for  example,  are  entirely  taken  up  with  this  topic.  In  England,  America, 
and  Italy  the  best-known  economists,  Cannan,  Fisher,  and  Pareto,  have  recently 
revived  the  ancient  notions,  and  the  discussions  which  have  followed  are 
sufficient  evidence  that  Smith  had  by  no  means  exhausted  the  subject.  If 
we  carefully  read  Book  II  of  the  Wealth  of  Nations,  which  is  entirely 
devoted  to  this  topic,  what  do  we  find  ?  We  have  a  distinction  drawn 
between  fixed  and  circulating  capital  borrowed  from  practical  affairs,  but 


72  ADAM  SMITH 

exception  of  division  of  labour  and  the  invention  of  money,  Smith 
thought  there  was  no  phenomenon  of  greater  importance  and  no 
more  essential  fount  of  national  wealth  than  capital.  The  larger 
the  store  of  capital,  the  greater  the  number  of  productive  workers, 
makers  of  tools  and  machinery — the  essentials  of  increased  produc- 
tivity— the  further  will  division  of  labour  extend.  To  increase  a 
nation's  capital  is  to  expand  its  industry  and  to  further  its  well- 
being.1  In  some  passages  the  growth  of  wealth  appears  not  merely 
as  the  chief  but  as  the  only  method  of  augmenting  a  nation's  wealth. 
"  The  industry  of  the  society  can  augment  only  in  proportion  as  its 
capital  augments,  and  its  capital  can  augment  only  in  proportion  to 
what  can  be  gradually  saved  out  of  its  revenue."  2  In  short,  capital 
limits  industry,3  a  phrase  that  was  destined  to  become  classic,  and 
one  that  was  repeated  by  every  economist  down  to  Mill.  Capital  is 
the  true  source  of  economic  life.  Let  capital  increase  and  industry 
will  expand  in  every  direction ;  diminish  it  and  a  bar  is  set  to  all 
improvement.  Capital  fertilises  the  earth,  whereas  the  labour  of 
man  simply  leaves  it  a  weary  waste. 

Criticism  has  been  freely  levelled  at  this  extravagant  importance 
which  capital  is  made  to  assume.  It  is  certainly  somewhat  curious 
that  labour  should  now  be  treated  as  altogether  subordinate  to 
capital,  whereas  earlier  in  the  volume  labour  alone  was  regarded  as 
the  great  wealth-producing  agent.  But  we  are  not  here  concerned 

possessing  no  great  scientific  value;  the  very  doubtful  identification  of 
national  capital  with  the  sum  of  private  capitals ;  a  very  unsatisfactory 
attempt  at  differentiating  between  the  notions  of  capital  and  revenue  ; 
the  affirmation  that  saving  involves  consumption,  a  paradox  repeated  ad 
nauseam  down  to  the  days  of  Mill;  the  commonplace  statement  that  capital 
increases  as  saving  grows ;  and,  finally,  the  proposition  that  "  capital  limits 
industry." 

1  Wealth  of  Nations,  Book  II,  chap.  3  ;  Cannan,  vol.  i,  p.  325.  "  The  annual 
produce  of  the  land  and  labour  of  any  nation  can  be  increased  in  its  value  by  no 
other  means,  but  by  increasing  either  the  number  of  its  productive  labourers,  or 
the  productive  powers  of  those  labourers  who  had  before  been  employed.  The 
number  of  its  productive  labourers,  it  is  evident,  can  never  be  much  increased, 
but  in  consequence  of  an  increase  of  capital,  or  of  the  funds  destined  for  main- 
taining them.  The  productive  powers  of  the  same  number  of  labourers  cannot 
be  increased,  but  in  consequence  either  of  some  addition  and  improvement  to 
these  machines  and  instruments  which  facilitate  and  abridge  labour ;  or  of  a  more 
proper  division  and  distribution  of  employment.  In  either  case  an  additional 
capital  is  almost  always  required." 

1  Ibid.,  Book  IV,  chap.  2  ;  vol.  i,  p.  423. 

1  "  The  general  industry  of  the  society  never  can  exceed  what  the  capital  of 
the  society  can  employ."  (Ibid.,  Book  IV,  chap.  2  ;  vol.  i,  p.  419.)  John 
Stuart  Mill  was  the  first  to  employ  the  formula  in  its  condensed  form,  "  Industry 
is  limited  by  capital." 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       78 

with  the  revival  of  these  threadbare  controversies.1  We  merely  wish 
to  note  that  Smith  finds  in  this  accumulation  of  capital  a  new 
illustration  of  spontaneity.  The  saving  of  capital  is  not  the  result  of 
any  foresight  on  the  part  of  society,  but  is  solely  due  to  the  simul- 
taneous and  concurrent  actions  of  thousands  of  individuals.  These 
individuals,  urged  on  by  a  desire  to  better  their  situation,  are 
spontaneously  urged  to  save  their  earnings  and  to  employ  those 
savings  productively. 

"  The  principle  which  prompts  to  save,  is  the  desire  of  bettering 
our  condition,  a  desire  which,  though  generally  calm  and  dispas- 
sionate, comes  with  us  from  the  womb,  and  never  leaves  us  till  we  go 
into  the  grave.  .  .  .  An  augmentation  of  fortune  is  the  means  by 
which  the  greater  part  of  men  propose  and  wish  to  better  their  condi- 
tion. It  is  the  means  the  most  vulgar  and  the  most  obvious ;  and 
the  most  likely  way  of  augmenting  their  fortune,  is  to  save  and 
accumulate  some  part  of  what  they  acquire."  This  desire  is  so 
powerful  that  even  the  greatest  follies  perpetrated  by  Governments 
have  never  succeeded  in  annulling  its  beneficial  effects.  "  The 
uniform,  constant,  and  uninterrupted  effort  of  every  man  to  better 
his  condition,  the  principle  from  which  public  and  national  as  well 
as  private  opulence  is  originally  derived,  is  frequently  powerful 
enough  to  maintain  the  natural  progress  of  things  toward  improve- 
ment, in  spite  both  of  the  extravagance  of  government,  and  of  the 
greatest  errors  of  administration.  Like  the  unknown  principle  of 
animal  life,  it  frequently  restores  health  and  vigour  to  the  constitution, 
in  spite,  not  only  of  the  disease,  but  of  the  absurd  prescriptions  of 
the  doctor."* 

But  the  idea  of  the  spontaneity  of  economic  institutions  finds  its 
most  interesting  illustration  in  the  theory  of  demand  and  supply, 
upon  which  we  must  dwell  a  little. 

In  a  society  based  upon  division  of   labour,   where  everyone 

1  We  have  spoken  of  the  controversies  as  threadbare,  for  every  economist 
is  by  this  time  persuaded  that,  assuming  the  necessity  for  the  co-operation  of 
capital,  land,  and  labou  in  production,  it  is  quite  clear  that  the  amount  of  produce 
raised  must  depend  upon  the  amount  of  each  of  these  factors  employed,  and  not 
upon  thu  amount  of  any  one  of  them. 

Smith  had  anticipated  the  arguments  advanced  by  such  socialists  as 
Rodbertus  and  Lassalle,  who  regard  saving  rather  than  labour  as  the  source  of 
capital.  "Parsimony,  and  not  industry,  is  the  immediate  cause  oi  the  increase 
of  capital.  Industry,  indeed,  provides  the  subject  which  parsimony  accumulates. 
But  whatever  industry  might  acquire,  if  parsimony  did  not  save  and  store  up, 
the  capital  would  never  be  the  greater."  (Wealth  of  Nations,  Book  II,  chap.  3; 
Cannan,  vol.  i,  p.  320.) 

»  Ibid.,  Book  II,  chap.  3 ;  vol.  i,  pp.  323,  324,  325. 


74  ADAM  SMITH 

produces  for  a  market  without  any  previous  arrangement  with  his 
fellow  producers  and  without  any  external  direction,  the  great  diffi- 
culty lies  in  adapting  the  amount  of  goods  supplied  to  the  amount 
demanded.  How,  as  a  matter  of  fact,  are  these  producers  to  know 
at  any  particular  moment  what  they  ought  to  produce  and  in  what 
quantities  ?  Moreover,  who  is  to  direct  and  who  can  restrain 
them  ?  It  is  true  that  Smith  was  careful  to  point  out  that  they  are 
not  concerned  with  the  satisfaction  of  all  needs,  of  whatever  kind 
they  may  be.  Their  duty  lies  towards  what  he  calls  the  "  effectual," 
not  the  "  absolute,"  demand.  By  effectual  demand  we  are  to  under- 
stand the  demand  of  those  who  are  capable  of  offering  not  merely 
something  in  exchange  for  the  products  which  they  desire,  but  of 
offering  at  least  enough  to  cover  the  expenses  of  raising  those 
products.1  Society  founded  upon  division  of  labour  and  exchange 
implies  that  nothing  can  be  gratuitous  and  every  loss  involves  a 
sacrifice  on  the  part  of  some  person  or  other.2  But  if  production  is 
carried  on  in  this  haphazard  fashion  how  are  we  to  avoid  an 
occasional  over-production  or  an  accidental  under-supply  ? 

Before  we  can  understand  this  we  must  acquaint  ourselves  with 
Adam  Smith's  theory  of  prices. 

In  the  preceding  chapter  we  had  occasion  to  note  how  Condillac 
in  1776  put  forward  a  theory  of  value  which  was  altogether  superior 
to  the  Physiocrats'.  Smith's  book,  also  published  in  1776,  betrays 
not  the  least  sign  of  Condillac's  influence,  and  the  new  theory  never 

1  Wealth  of  Nations,  Book  I,  chap.  7  ;  Cannan,  vol.  i,  p.  58.  "  The  market 
price  of  every  particular  commodity  is  regulated  by  the  proportion  between  the 
quantity  which  is  actually  brought  to  market,  and  the  demand  of  those  who  are 
willing  to  pay  the  natural  price  of  the  commodity,  or  the  whole  value  of  the  rent, 
labour,  and  profit,  which  must  be  paid  in  order  to  bring  it  thither.  Such  people 
may  be  called  the  effectual  demanders,  and  their  demand  the  effectual  demand  ; 
since  it  may  be  sufficient  to  effectuate  the  bringing  of  the  commodity  to  market. 
It  is  different  from  the  absolute  demand.  A  very  poor  man  may  be  said  in  some 
sense  to  have  a  demand  for  a  coach  and  six  ;  he  might  like  to  have  it ;  but  his 
demand  is  not  an  effectual  demand,  as  the  commodity  can  never  be  brought 
to  market  in  order  to  satisfy  it." 

1  For  Smith  oppression  meant  the  tyranny  either  of  producers  or  consumers. 
When  profits  are  above  the  normal  rate  "it  is  a  proof  that  something  is  either 
bought  cheaper  or  sold  dearer  than  it  ought  to  be,  and  that  some  particular 
class  of  citizens  is  more  or  less  oppressed  either  by  paying  more  or  by  getting 
less  than  what  is  suitable  to  that  equality  which  ought  to  take  place,  and  which 
naturally  does  take  place  among  all  the  different  classes  of  them."  (Ibid.. 
Book  IV,  chap.  7,  part  iii ;  vol.  ii,  p.  128.) 

The  correspondence  between  selling  price  and  the  cost  of  production  seemed 
to  Smith  to  be  of  the  very  essence  of  justice.  Complete  correspondence  would 
realise  t  e  ideal  of  the  just  price. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       75 

comes  up  for  discussion.  The  very  success  of  the  Wealth  of  Nations 
had  eclipsed  the  fame  of  the  French  philosopher,  and  Smith's  theory, 
though  quite  inferior  to  Condillac's,  held  the  field  for  so  many  years 
simply  because  it  won  the  allegiance  of  the  English  economists,  whose 
influence  was  paramount  throughout  the  first  half  of  the  nineteenth 
century.  Its  popularity  only  waned  with  the  publication  of  the 
works  of  Walras,  Jevons,  and  Menger.  Its  historic  interest  is  further 
enhanced  by  the  fact  that  it  had  the  singular  good  fortune  to  win 
the  approval  both  of  the  socialists  and  the  Liberal  economists.  It 
is  the  fate  of  writers  like  Smith,  remarkable  for  wealth  of  ideas 
rather  than  for  logical  presentation,  to  impel  minds  along  different 
and  sometimes  even  opposite  paths.  Unfortunately  the  theory  of 
value  is  not  the  only  one  that  presents  a  somewhat  hazy  outline. 
We  cannot  here  enter  into  the  details  of  the  theory,  but  must  content 
ourselves  with  a  mere  sketch  of  it.  Even  this,  however,  will  imme- 
diately enable  us  to  understand  its  insufficiency,  and  appreciate  the 
twofold  influence  which  it  exercised  upon  subsequent  doctrines. 

Smith  opens  his  treatment  by  emphasising  the  fundamental 
distinction  which  exists  between  "  value  in  use  "  and  "  value  in 
exchange."  J  By  value  in  use  he  means  almost  2  exactly  what  we 
understand  by  utility,  or  what  other  writers  call  subjective  value, 
desirability,  or  ophelimity. 

Present-day  economists  when  treating  of  prices — the  exchange 
value  of  things — chiefly  rely  upon  this  conception  of  "  value  in  use." 
The  explanation  of  the  "  ratio  of  exchange  "  of  commodities  is  based 
upon  a  previous  analysis  of  their  utility  for  those  who  exchange 

1  Wealth  of  Nations,  Book  I,  chap.  4  ;  Cannan,  vol.  i,  p.  30.  The  passage  is 
well  known.  "  The  word  '  value,'  it  is  to  be  observed,  has  two  different  meanings, 
and  sometimes  expresses  the  utility  of  some  particular  object,  and  sometimes  the 
power  of  purchasing  other  goods  which  the  possession  of  that  object  conveys. 
The  one  may  be  called  '  value  in  use,'  the  other  '  value  in  exchange.'  The  things 
which  have  the  greatest  value  in  use  have  frequently  little  or  no  value  in  exchange; 
and,  on  the  contrary,  those  which  have  the  greatest  value  in  exchange  have  fre- 
quently little  or  no  value  in  use.  Nothing  is  more  useful  than  water  :  but  it  will 
purchase  scarce  anything  ;  scarce  anything  can  be  had  in  exchange  for  it.  A 
diamond,  on  the  contrary,  has  scarce  any  valu  in  use ;  but  a  very  great  quantity 
of  other  goods  may  frequently  be  had  in  exchange  for  it." 

1  The  statement  has  been  qualified  because  in  the  passage  referred  to  Smith 
seems  to  define  utility  in  the  vulgar  sense  (i.e.  utility  as  contrasted  with  mere 
agreeableness).  This  want  of  exactness  was  corrected  by  Ricardo,  and  is  the 
subject  of  a  searching  criticism  by  Mill.  The  following  passage  from  his  Lectures 
on  Justice  may  serve  to  throw  some  light  upon  the  definition :  "  There  is  no 
demand  for  a  thing  of  little  use ;  it  is  not  a  rational  object  of  desire."  Smith  could 
not  conceive  the  possibility  of  a  demand  or  even  a  desire  for  a  commodity  which 
was  useless  from  a  rational  point  of  view.  But  this  is  evidently  a  great  mista  ke. 


76  ADAM  SMITH 

them.  Smith  proceeds  in  a  different  fashion.  **  Value  in  use  "  is 
mentioned,  but  only  for  the  purpose  of  contrasting  it  with  value  in 
exchange.  It  is  then  dismissed  without  further  consideration.  The 
two  notions  seem  to  have  no  point  of  contact.  Value  in  exchange 
was  the  only  one  that  was  of  any  interest  to  Smith ;  hence  there 
was  all  the  more  reason  for  denying  its  derivative  character.1 

Thus  from  the  very  first  the  only  avenue  that  might  have  led  to  a 
satisfactory  solution  of  this  problem  of  prices  was  closed.  One  could 
easily  have  predicted  that  this  was  bound  to  land  Smith  in  difficulty  ; 
as  a  matter  of  fact  he  is  doubly  involved.2  Two  different  but  equally 
erroneous  solutions  have  been  successively  adopted  by  him,  but  he 
has  never  actually  decided  between  them.  The  socialists  and 
economists  who  are  to  follow  will  be  engaged  in  the  same  task,  and 
the  cleavage  between  them  will  be  marked  by  their  adoption  of  one 
or  other  of  these  two  theories. 

Smith  was  led  to  the  study  of  prices  because  he  wished  to  know 
something  of  the  constant  oscillation  which  is  such  a  feature  of  their 
history.  The  actual  or  market  price  is  unstable  because  of  the 
unstable  connection  between  demand  and  supply, 3  or,  as  he  puts  it, 
"  It  is  adjusted,  however,  not  by  any  accurate  measure,  but  by 
the  higgling  and  bargaining  of  the  market,  according  to  that  sort  of 
rough  equality  which,  though  not  exact,  is  sufficient  for  carrying  on 
the  business  of  common  life."  4  It  seemed  impossible  that  their 
perpetual  fluctuation  should  represent  the  true  value  of  the  com- 
modity. Its  real  value  could  not  vary  from  this  moment  to  the 
next  or  from  one  place  to  another.  Underneath  the  constantly 
oscillating  market  price  may  be  discerned  another  price,  referred  to 
by  Smith  as  the  real  or  sometimes  as  the  natural  price.  The 
discovery  of  a  more  stable  and  a  more  constant  element  beneath  the 
continual  fluctuations  of  price  movements  still  constitutes  the  great 
problem  of  pure  economics.6 

1  The  radical  separation  of  the  two  ideas  was  perhaps  more  a  matter  of 
expression  than  of  reasoning,  for  in  his  Lectures  on  Justice,  p.  176,  value  in  use, 
coupled  with  the  purchasing  power  possessed  by  those  who  desired  the  commodity, 
was  regarded  as  one  of  the  elements  which  determined  the  demand  for  it  and 
fixed  its  market  price.  The  whole  discussion  of  the  theory  of  value  by  Smith 
is  very  unsatisfactory. 

1  We  ought  perhaps  to  have  said  that  he  had  to  choose  between  three  possible 
definitions,  for  in  the  Lectures  on  Justice  we  find  a  third  definition  of  "  natural 
price  "  (p.  176). 

*  Wealth  of  Nations,  Book  I,  chap.  7  ;  Carman,  vol.  i,  p.  58. 

*  Ibid.,  Book  I,  chap.  5  ;  vol.  i,  p.  33. 

*  Pareto  in  his  recent  article  L'Economie  et  la  Sociologie  au  point  de  vue  scienti- 
fique  (Rivista  di  Scienza,  1907,  No.  2)  expresses  himself  as  follows  :  "  Underneath- 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH      77 

Smith's  first  theory  makes  the  true  value  of  any  commodity  I 
depend  upon  the  amount  of  labour  or  effort  it  has  taken  to  produce,  j 
"  Labour,  therefore,  is  the  real  measure  of  the  exchangeable  value 
of  all  commodities. "  "  The  real  price  of  every  thing,  what  every  thing 
really  costs  to  the  man  who  wants  to  acquire  it,  is  the  toil  and  trouble 
of  acquiring  it."  l  Labour — that  is,  the  effort  expended  upon  the 
production  of  a  commodity — is  both  the  origin  and  the  measure  of 
its  exchange  value.  The  theory  that  labour  or  effort  is  the  cause 
of  value  (if  value  can  be  said  to  have  a  cause)  was  first  formulated 
by  the  father  of  political  economy  himself.  It  is  curious  to  think 
that  it  was  this  same  theory  that  was  used  with  such  good  effect  by 
Karl  Marx  in  his  attack  upon  capitalism. 

This  first  attempt  to  find  a  firmer  foundation  for  exchange  value 
than  that  afforded  by  the  shifting  sands  of  demand  and  supply  was 
scarcely  made  before  Smith  became  aware  of  some  difficulties  in  the 
path.  For  example,  how  was  this  work  and  the  value  dependent 
upon  it  to  be  measured  ?  "  There  may  be  more  labour  in  an  hour's 
hard  work  than  in  two  hours'  easy  business  ;  or  in  an  hour's  applica- 
tion to  a  trade  which  it  cost  ten  years'  labour  to  learn,  than  in  a 
month's  industry  at  an  ordinary  and  obvious  employment.  But  it 
is  not  easy  to  find  any  accurate  measure  either  of  hardship  or 
ingenuity."  a  A  second  objection  arises  when  the  theory  is  applied 
to  civilized  society.  Work  by  itself  cannot  produce  anything; 
something  must  be  contributed  by  both  land  and  capital.  But 
neither  of  these  is  a  free  good,  and  they  must  cost  something  to  those 
who  employ  them.  Accordingly  primitive  societies  3  are  the  only 
ones  where  "  the  quantity  of  labour  commonly  employed  in  acquiring 
or  producing  any  commodity  is  the  only  circumstance  determining 
its  value."  We  must  nowadays  take  some  account  of  land  and 

the  actual  prices  quoted  on  the  exchanges,  prices  varying  according  to  the  exi- 
gencies of  time  and  place  and  dependent  upon  an  infinite  number  of  circumstances, 
is  there  nothing  which  has  any  constancy  or  is  in  any  degree  less  variable  ? 
This  is  the  problem  that  political  economy  must  solve." 

1  Wealth  of  Nations,  Book  I,  chap.  6  ;  Carman,  vol.  i,  p.  32.  In  this  passage 
Smith  seems  to  imply  that  the  value  of  an  object  is  determined,  not  by  the  amount 
of  labour  which  it  cost  to  produce  it,  but  by  the  amount  of  labour  which  can  be 
bought  in  exchange  for  it.  Fundamentally  the  two  ideas  are  one,  for  objects  of 
equal  value  only  can  be  exchanged,  so  that  the  amount  of  labour  anyone  can 
buy  with  any  given  object  is  equal  to  the  amount  of  labour  which  that  object 
cost  to  produce.  "  Goods,"  says  Smith,  "  contain  the  value  of  a  certain  quantity 
of  labour,  which  we  exchange  for  what  is  supposed  at  the  time  to  contain  the 
value  of  an  equal  quantity." 

1  Ibid.,  Book  I,  chap.  5  ;  vol.  i,  p.  33. 

»  Ibid.,  Book  I,  chap.  6  ;  vol.  i,  p.  60. 


78  ADAM  SMITH 

capital.  So  that  labour  is  not  the  only  source  of  value,  nor  is  it 
its  sole  measure. 

Another  hypothesis  becomes  necessary  forthwith.  This  time  cost 
of  production  is  hit  upon  as  the  likely  regulator  of  value.  Hitherto 
the  "  real "  price  has  signified  the  price  that  is  based  upon  labour. 
Now  the  "  natural  "  price  is  defined  as  the  price  of  goods  valued  at 
their  cost  pf  production.  The  change  of  name  is  not  of  any  great 
significance.  What  Smith  was  in  search  of  on  both  occasions  was 
that  true  value  which  always  kept  in  hiding  behind  the  fluctuations 
of  market  prices.  It  is  the  same  problem,  but  with  a  new  solution. 
Just  now  we  were  informed  that  if  a  commodity  sold  at  a  price 
representing  the  labour  which  it  cost  to  produce,  that  price  would 
also  represent  its  real  cost.  With  no  less  assurance  we  are  now  told 
that  a  commodity  sold  at  cost  of  production  "  is  then  sold  precisely 
for  what  it  is  worth,  or  for  what  it  really  costs  the  person  who  brings 
it  to  market."  x  The  true  value  of  goods  corresponds  to  their  cost  of 
production.  By  this  we  are  to  understand  a  sum  sufficient  to  pay 
at  normal  rates  the  wages  of  labour,  the  interest  of  capital,  and  the 
rent  of  land,  all  of  which  have  collaborated  in  the  production  of 
the  particular  commodity. 

Smith,  having  discarded  labour,  finds  a  new  determinant  of  value 
in  cost  of  production,  and  if  socialists  rallied  to  his  first  hypothesis 
the  great  majority  of  economists  right  up  to  Jevons  have  clung  to 
his  second.  As  for  Smith  himself,  he  never  had  the  courage  to 
choose  between  them.  They  remain  juxtaposed  in  the  Wealth  of 
Nations  because  he  never  made  up  his  mind  which  to  adopt.  As  a 
result  his  work  is  full  of  contradictions  which  it  would  be  futile  to 
try  to  reconcile.  For  example,  land  and  capital  in  one  place  are 
regarded  as  sources  of  new  values,  adding  to  and  increasing  the  value 
which  labour  creates,  and  producing  normally  an  element  of  profit 
and  rent,  which,  together  with  the  wages  of  labour,  makes  up  the 
cost  of  production.  In  another  connection  they  are  treated  as 
deductions  made  by  capitalists  and  landlords  from  the  value  created 
by  labour  alone."  Some  writers  accordingly  argue  that  Smith  must 

1  Wealth  of  Nations,  Book  I,  chap.  7 ;  Carman,  vol.  i,  p.  57. 

1  Ibid.,  chap.  6 ;  vol.  i,  p.  51.  Here,  for  example,  is  a  passage  in  which, 
as  Bohm-Bawerk  forcibly  remarks  (Kapital  und  Kapitakins,  2nd  ed.,  1900, 
p.  84),  the  two  conceptions  are  found  in  juxtaposition  without  any  attempt 
at  reconciliation:  "In  this  state  of  things  [where  labour  and  capital  have 
already  been  appropriated]  the  whole  produce  of  labour  does  not  always  belong 
to  the  labourer.  He  must  in  most  cases  share  it  with  the  owner  of  the  stock 
which  employs  him.  Neither  is  the  quantity  of  labour  commonly  employed 
iu  acquiring  or  producing  any  commodity,  the  only  circumstance  which  can 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH      79 

have  been  a  socialist.  On  the  whole  the  cost  of  production  theory 
prevailed,  and  the  natural  price  of  commodities  is  taken  to  mean 
that  price  which  coincides  with  their  cost  of  production.  As  to 
market  price,  he  makes  the  remark  that  it  is  higher  or  lower  than  the 
natural  price  according  as  the  quantity  offered  diminishes  or  increases 
as  compared  with  the  quantity  demanded. 

Such  is  Smith's  theory  of  prices.  The  element  of  truth  which  it 
contains,  namely,  that  the  prices  of  goods  tend  to  coincide  with  their 
cost  of  production  (the  remark  is  not  originally  Smith's  at  all),  must 
not  blind  us  to  its  many  faults.  It  is  open  to  at  least  two  very 
serious  objections. 

An  attempt  is  made  to  explain  the  price  of  goods  by  referring 
to  the  price  of  the  services  (wages,  interest,  and  rent)  which  make  up 
the  cost  of  production.  When  the  cost  of  those  services  comes  up 
for  consideration  it  is  assumed  that  their  cost  is  dependent  upon  the 
price  of  the  goods.  Wages,  for  example,  are  determined  by  the 
selling  price  of  the  commodities  which  labour  has  produced.  Escape 
from  the  vicious  circle  is  only  possible  by  availing  ourselves  of  the. 

regulate  the  quantity  which  it  ought  commonly  to  purchase,  command,  or 
exchange  for.  An  additional  quantity,  it  is  evident,  must  be  due  for  the  profits 
of  the  stock  which  advanced  the  wages  and  furnished  the  materials  of  that 
labour."  At  the  beginning  of  the  passage  the  workman  shared  the  produce 
of  his  labour  and  profits  constituted  a  deduction  from  the  value  created  by  labour 
alone ;  at  the  end  of  the  paragraph  profits  issue  from  a  supplementary  value  which 
is  an  addition  to  the  value  already  given  it  by  labour.  Other  passages  where  the 
two  conceptions  come  into  contact  are  also  cited  by  Bohm-Bawerk.  Interest 
and  rent  are  also  occasionally  taken  as  evidence  that  the  workman  is  being 
exploited,  and  this  entitles  Smith  to  be  regarded  as  the  father  of  socialism.  More 
than  one  passage  in  his  work  seems  to  point  to  this  conclusion.  "  In  other 
countries,  rent  and  profit  eat  up  wages,  and  the  two  superior  orders  of  people 
oppress  the  inferior  one."  (Book  IV,  chap.  7,  part  ii ;  vol.  ii,  p.  67.)  Con- 
cerning property  he  writes :  "  Civil  government,  so  far  as  it  is  instituted  for  the 
security  of  property,  is  in  reality  instituted  for  the  defence  of  the  rich  against  the 
poor,  or  of  those  who  have  some  property  against  those  who  have  none  at  all." 
(Book  V,  chap.  1,  part  ii ;  vol.  ii,  p.  207.)  And  finally  there  is  the  famous  passage 
from  the  sixth  chapter :  "  As  soon  as  the  land  of  any  country  has  all  become 
private  property,  the  landlords,  like  all  other  men,  love  to  reap  where  they  never 
sowed,  and  demand  a  rent  even  for  its  natural  produce.  .  .  .  He  [the  workman] 
must  then  pay  for  the  licence  to  gather  them  ;  and  must  give  up  to  the  landlord 
a  portion  of  what  his  labour  either  collects  or  produces.  This  portion,  or,  what 
comes  to  the  same  thing,  the  price  of  this  portion,  constitutes  the  rent  of  land, 
and  in  the  price  of  the  greater  part  of  commodities  makes  a  third  component 
part."  (Book  I,  chap.  6  ;  vol.  i,  p.  51.)  Dr.  Caiman  in  his  History  of  the.  Theories 
of  Production  and  Distribution  goes  the  length  of  declaring  that  the  theory  of 
spoliation  is  the  only  one  in  Smith's  work.  It  is  to  Smith  that  we  owe  that  idea 
BO  frequently  expressed  by  socialists,  namely,  that  the  workman  in  modern  society 
never  really  obtains  the  produce  of  his  toil. 


80  ADAM  SMITH 

modern  theory  of  economic  equilibrium.  That  theory  shows  us 
how  prices  generally,  whether  of  goods  or  of  services,  are  inter- 
dependent ;  all  being  determined  simultaneously — like  the  unknown 
in  an  algebraical  formula — just  when  the  exchange  is  taking  place. 
But  this  theory  of  economic  equilibrium  was,  of  course,  unknown  to 
Smith. 

Cost  of  production  being  the  regulator  of  price,  it  is  very 
important  that  an  analysis  of  cost  of  production  and  a  study  of  the 
causes  which  determine  the  rates  of  wages,  profit,  and  rent  should  be 
made.  One  might  have  expected  that  this  study  would  have  cleared 
away  any  obscurity  that  still  clung  to  the  theory  of  prices.  But 
this  analysis  is  one  of  the  least  satisfactory  portions  of  Smith's  work. 
We  have  already  had  occasion  to  note  the  unsatisfactory  charactei 
of  his  theory  of  rent.  That  of  profits — which  Smith  fails  to  dis- 
tinguish from  interest — is  equally  useless  ; l  and  his  theory  of  wages 
is  hopelessly  inconsistent.  He  hesitates  between  the  subsistence 
theory  of  wages  and  the  other  theory  which  makes  them  depend 
upon  the  relations  between  demand  and  supply,  without  ever  making 
a  final  choice. 

We  cannot  agree  with  Say  in  considering  Smith's  theory  of 
distribution  one  of  his  best  claims  to  fame.  His  treatment  of  this 
problem,  which  afterwards  became  the  kernel  of  Ricardian  economics, 
is  altogether  inferior  to  his  handling  of  production.  We  also  know 
that  this  is  the  least  original  part  of  his  work.  It  was  simply  added 
as  a  kind  of  afterthought,  the  original  intention  being  to  deal 
only  with  production.  This  becomes  evident  if  we  compare  the 
Wealth  of  Nations  with  the  Glasgow  course  of  1763,  the  whole  of 
which  is  devoted  to  production.  The  addition  of  a  theory  of 
distribution  to  the  original  skeleton  was  probably  due  to  the 
Physiocrats,  with  whom  in  the  meantime  he  had  become  acquainted ; 
and  the  hesitations  and  uncertainties  which  mar  this  part  of  the 
work  merely  go  to  prove  that  Smith  had  not  thought  it  out  a* 
clearly  as  the  other  sections. 

The  subject  cannot  be  pursued  here.  We  can  only  point  to  the 
inference  which  Smith  draws  from  his  theory  of  value,  and  how  it  is 
made  to  support  the  contention  that  demand  adapts  itself  spon- 
taneously to  the  conditions  of  supply.  This  is  how  Smith  explains 
the  continual  oscillation  of  prices  :  "  When  the  quantity  brought  to 
market  exceeds  the  effectual  demand,  it  cannot  be  all  sold  to  those 
who  are  willing  to  pay  the  whole  value  of  the  rent,  wages  and  profit, 
which  must  be  paid  in  order  to  bring  it  thither.  Some  part  must  be 

*  Cf.  supra,  p.  64,  note  2. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH      81 

sold  to  those  who  are  willing  to  pay  less,  and  the  low  price  which 
they  give  for  it  must  reduce  the  price  of  the  whole.  The  market 
price  will  sink  more  or  less  below  the  natural  price  according  as  the 
greatness  of  the  excess  increases  more  or  less  the  competition  of  the 
sellers,  or  according  as  it  happens  to  be  more  or  less  important  to 
them  to  get  immediately  rid  of  the  commodity."  The  reverse  will 
happen  when  demand  exceeds  supply.  "  When  the  quantity  brought 
to  market  is  just  sufficient  to  supply  the  effectual  demand  and  no 
more,  the  market  price  naturally  comes  to  be  either  exactly,  or  as 
nearly  as  can  be  judged  of,  the  same  with  the  natural  price.  The 
whole  quantity  upon  hand  can  be  disposed  of  for  this  price,  and 
cannot  be  disposed  of  for  more.  The  competition  of  the  different 
dealers  obliges  them  all  to  accept  of  this  price,  but  does  not  oblige 
them  to  accept  of  less."  Thus  "  the  quantity  of  every  commodity 
brought  to  market  naturally  suits  itself  to  the  effectual  demand."  1 

And  this  very  remarkable  result  is  simply  the  outcome  of  personal 
interest.  "  If  at  any  time  it  exceeds  the  effectual  demand,  some  of 
the  component  parts  of  its  price  must  be  paid  below  their  natural 
rate.  If  it  is  rent,  the  interest  of  the  landlords  will  immediately 
prompt  them  to  withdraw  a  part  of  their  land ;  and  if  it  is  wages  or 
profit,  the  interest  of  the  labourers  in  the  one  case,  and  of  their 
employers  in  the  other,  will  prompt  them  to  withdraw  a  part  of 
their  labour  or  stock  from  this  employment.  The  quantity  brought  to 
market  will  soon  be  no  more  than  sufficient  to  supply  the  effectual 
demand.  All  the  different  parts  of  its  price  will  rise  to  their  natural 
rate,  and  the  whole  price  to  the  natural  price." 

And  so,  in  the  majority  of  cases  at  least,  this  natural  and  spon- 
taneous mechanism  secures  a  constant  balancing  of  the  quantities  of 
goods  produced  and  the  quantities  effectively  demanded.  The 
circumstances  under  which  such  a  result  does  not  follow  are  really 
quite  exceptional — although  Smith  does  not  deny  that  sometimes 
they  do  exist.  Whenever  such  conditions  obtain — that  is,  when  the 
market  price  remains  for  a  considerable  length  of  time  above  the 
natural  price — we  find  that  it  is  always  due  to  the  capitalists'  action 
in  concealing  the  high  rate  of  profits  which  they  draw,  or  in  retaining 
possession  of  some  patent  or  natural  monopoly,  such  as  wine  of  a 
special  quality.  It  occasionally  happens  also  as  the  result  of  an 
artificial  monopoly.2  But  these  are  mere  exceptions,  their  rare 

1  Wealth  of  Nations,  Book  I,  chap.  7  ;  Cannan,  vol.  i,  p.  59. 

1  Smith  only  gives  at  most  seven  or  eight  lines  to  monopoly  price.  He 
simply  states  that  "  the  price  of  monopoly  is  upon  every  occasion  the  highest 
which  can  be  got."  (Ibid.,  Book  I,  chap.  7  ;  vol.  i,  p.  63.)  To-day  the  theory 
of  monopoly  priors  is  one  of  the  most  important  in  the  whole  of  economics. 


82  ADAM  SMITH 

occurrence  confirming  the  fundamental  rule  concerning  the  spon- 
taneous adaptation  of  the  quantity  offered  to  the  quantity  demanded, 
thanks  to  this  oscillation  of  the  market  price  about  the  natural. 

This  theory  of  adaptation,  we  know,  is  one  of  the  most  important 
in  the  whole  of  political  economy.  Since  Smith  wrote  it  has  been 
reproduced  by  almost  every  economist,  and  without  any  very 
substantial  alteration.  It  remains  even  to  this  day  the  basis  of  our 
theory  of  production. 

It  is  interesting  to  note  the  manner  in  which  Smith  makes  use  of 
his  theory  to  illustrate  his  thesis.  We  shall  refer  to  two  cases  which 
are  intrinsically  important  as  well  as  affording  admirable  illustrations 
of  that  spontaneity  upon  which  Smith  laid  such  stress. 

The  first  concerns  population.  Population,  like  commodities, 
may  be  superabundant  or  it  may  be  insufficient.  What  regulates  its 
numbers  ?  "  The  number  of  people,"  Smith  replies,  "  depends  upon 
the  demand  of  society,  and  this  is  how  it  works.  Among  the 
proletariat,  generally  speaking,  children  are  plentiful  enough.  It  is 
only  when  wages  are  very  low  that  poverty  and  misery  cause  the 
death  of  many  of  them ;  but  when  wages  are  fairly  high  several  of 
them  manage  to  reach  maturity."  "  It  deserves  to  be  remarked, 
too,"  he  continues,  "  that  it  necessarily  does  this  as  nearly  as 
possible  in  the  proportion  which  the  demand  for  labour  requires.  If 
this  demand  is  continually  increasing,  the  reward  of  labour  must 
necessarily  encourage  in  such  a  manner  the  marriage  and  multiplica- 
tion of  labourers  as  may  enable  them  to  supply  that  continually 
increasing  demand  by  a  continually  increasing  population.  If  the 
reward  should  at  any  time  be  less  than  what  was  requisite  for  this 
purpose,  the  deficiency  of  hands  would  soon  raise  it ;  and  if  it  should 
at  any  time  be  more,  their  excessive  multiplication  would  soon  lower 
it  to  this  necessary  rate.  The  market  would  be  so  much  under-stocked 
with  labour  in  the  one  case,  and  so  much  over-stocked  in  the  other,  as 
would  soon  force  back  its  price  to  that  proper  rate  which  the  circum- 
stances of  the  society  required.  It  is  in  this  manner  that  the  demand 
for  men,  like  that  for  any  other  commodity,  necessarily  regulates  the 
production  of  men ;  quickens  it  when  it  goes  on  too  slowly,  and 
stops  it  when  it  advances  too  fast."  x 

The  second  case  relates  to  the  demand  for  money  and  its  supply. 
We  have  already  seen  how  the  problem  of  its  origin  is  solved. 
Alongside  of  that  problem  is  now  placed  another,  namely,  how 
is  the  quantity  in  circulation  regulated  to  meet  the  requirements 
of  exchange  ?  Smith's  first  task  was  to  expose  the  popular  fallacy 
1  WttUlh  of  Nations,  Book  I,  chap.  8;  Cannan,  vol.  i,  pp.  81-82. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       83 

concerning  this  topic.1  According  to  one  school  of  thinkers,  money 
was  wealth  par  excellence,  and  it  was  all  the  more  important  that  he 
should  get  rid  of  this  view  seeing  that  it  constituted  the  very 
foundation  of  the  Mercantile  theory,  the  overthrow  of  which  was  the 
immediate  object  in  publishing  the  Wealth  of  Nations.  The  Mercan- 
tilists contended  that  a  country  should  export  more  than  it  imports, 
receiving  the  balance  in  money.  If  it  can  be  proved  that  this  balance 
is  useless  because  money  is  a  mere  commodity  possessing  no  greater 
and  no  less  utility  than  any  other,  then  the  Mercantilist  foundation 
is  completely  destroyed.  Smith  thought  that  money  was  less 
indispensable  than  some  other  goods,  seeing  that  we  are  anxious  to 
pass  it  on  as  often  as  we  can.  The  disdain  with  which  Smith 
regarded  money  was  the  result  of  a  reaction  against  Mercantilism, 
and  it  led  some  of  his  followers  to  over-emphasise  his  point  of  view 
and  to  misconceive  the  special  character  of  monetary  phenomena. 
A  nation's  true  wealth  "  consists,"  Smith  tells  us,  "  not  in  its  gold 
and  silver  only,  but  in  its  lands,  houses,  and  consumable  goods  of 
all  different  kinds."  z  "  It  is  the  annual  produce  of  the  land  and 
labour  of  the  society."  3  Hence  in  evaluating  a  country's  net  revenue 
we  must  omit  money  because  it  is  not  consumed.  It  only  serves 
as  an  instrument  for  the  circulation  of  wealth  and  for  the  measure- 
ment of  value.  It  is  the  "  great  wheel  of  circulation,"  4  In  virtue 
of  this  title,  although  Smith  himself  classed  money  along  with  circu- 
lating capital,  he  remarks  that  it  might  be  likened  to  the  fixed 
capital  of  an  industry,  to  machinery  or  workshops.  The  greater  the 
economy  in  the  use  of  fixed  capital,  provided  there  is  no  diminution 
in  production,  the  better,  for  the  larger  will  be  the  net  product. 

1  "  That  wealth  consists  in  money,  or  in  gold  and  silver,  is  a  popular  notion 
which  naturally  arises  from  the  double  function  of  money,  as  the  instrument  of 
commerce,  and  as  the  measure  of  value."  (Wealth  of  Nations,  Book  IV,  chap.  1 ; 
Cannan,  vol.  i,  p.  396.)  The  whole  chapter  is  an  attempt  to  get  rid  of  this 
prejudice. 

1  Ibid.,  Book  IV,  chap.  1  ;  vol.  i,  p.  416  ;  also  Book  II,  chap.  2  ;  vol.  i, 
p.  274.  "  Though  the  weekly  or  yearly  revenue  of  all  the  different  inhabitants 
of  any  country,  in  the  same  manner,  may  be,  and  in  reality  frequently  is,  paid  to 
them  in  money,  their  real  riches,  however,  the  real  weekly  or  yearly  revenue  of 
all  of  them  taken  together,  must  always  be  great  or  small  in  proportion  to  the 
quantity  of  consumable  goods  which  they  can  all  of  them  purchase  with  this 
money.  The  whole  revenue  of  all  of  them  taken  together  is  evidently  not  equal 
to  both  the  money  and  the  consumable  goods  ;  but  only  to  one  or  other  of  those 
two  values,  to  the  latter  more  properly  than  to  the  former." 

*  We  meet  with  this  expression  several  times  :   in  Book  I,  chap.  11,  part  iii 
(vol.  i,  pp.  4  and  240),  and  in  Book  II,  chap.  3  (vol.  i,  pp.  315,  323). 

*  An  expression  that  is  met  with  three  times — in  chap.  2  of  Book  II  (vol.  i, 
pp.  272,  276,  279). 


84  ADAM  SMITH 

This  is  equally  true  of  money — a  necessary  but  a  very  costly  instru- 
ment of  social  production.  "  Every  saving  in  the  expence  of  collect- 
ing and  supporting  that  part  of  the  circulating  capital  which  consists 
in  money  is  an  improvement  of  exactly  the  same  kind  "  x  as  that 
which  reduces  the  fixed  capital  of  industry.2 

This  is  why  bank-notes — the  circulation  of  which  diminishes  the 
quantity  of  money  needed — have  proved  such  a  precious  invention. 
What  they  do  is  to  set  free  a  certain  quantity  of  gold  and  silver  which 
may  be  sent  abroad  to  pay  for  machinery  and  other  instruments  of 
production,  and  which  will  in  turn  increase  the  true  revenue  of  the 
country.  Smith's  parable  in  which  he  illustrates  these  advantages, 
has  long  since  become  classic :  "  The  gold  and  silver  money  which 
circulates  in  any  country  may  very  properly  be  compared  to  a  high- 
way, which,  while  it  circulates  and  carries  to  market  alT  the  grass 
and  corn  of  the  country,  produces  itself  not  a  single  pile  of  either. 
The  judicious  operations  of  banking,  by  providing,  if  I  may  be 
allowed  so  violent  a  metaphor,  a  sort  of  waggon-way  through  the 
air ;  enable  the  country  to  convert,  as  it  were,  a  great  part  of  its 
highways  into  good  pastures  and  cornfields,  and  thereby  to  increase 
very  considerably  the  annual  produce  of  its  land  and  labour."  3 

The  conclusion  is  that  every  policy — the  Mercantilist,  for  example 
— which  aims  at  increasing  the  quantity  of  money  within  the  country, 
whether  by  direct  or  indirect  methods,  is  absurd,  for  money,  far 
from  being  indispensable,  is  really  an  encumbrance. 

It  is  not  only  absurd,  but  also  useless.  Have  we  not  seen  already 
that  money  is  a  mere  commodity  designed  to  facilitate  circulation 
and  that  the  demand  for  it  is  entirely  determined  by  that  object  ? 
But  the  supply  of  any  commodity  usually  adapts  itself  spontaneously 
to  the  demand  for  it.  No  one  concerns  himself  with  supplying  the 
nation  with  wine  or  with  crockery.  Why  trouble  about  money  ?  * 
If  the  quantity  of  goods  diminishes,  exchange  slackens  and  a  part 
of  the  money  becomes  useless.  But  "  the  interest  of  whoever 
possesses  it  requires  that  it  should  be  employed."  5  Accordingly 

1  Wealth  of  Nations,  Book  II,  chap.  2  ;  Carman,  vol.  i,  p.  275. 

1  All  these  questions  so  obscurely  treated  in  Smith's  work  are  handled  with 
admirable  lucidity  in  Irving  Fisher's  Nature  of  Capital  and  Income  (New  York, 
1907).  Revenue  is  entirely  stripped  of  that  material  suggestion  which  was 
always  associated  with  it  in  Smith's  work,  and  is  looked  upon  as  a  continual  flow 
of  services,  whilst  capital  as  a  whole  is  regarded  as  total  wealth  existing  at  one 
particular  moment  and  from  which  these  services  flow  out. 

8  Wealth  of  Nations,  Book  II,  chap.  2  ;  Cannan,  vol.  i,  p.  304. 

*  Ibid.,  Book  IV,  chap.  1  ;  vol.  i,  pp.  402,  406. 

*  Ibid.,  Book  II,  chap.  3  ;  vol.  i,  p.  322. 


THE  NATURALISM  AND  OPTIMISM  or  SMITH      85 

•'  it  will,  in  spite  of  all  laws  and  prohibitions,  be  sent  abroad,  and 
employed  in  purchasing  consumable  goods  which  may  be  of  some 
use  at  home." 

On  the  other  hand,  as  the  prosperity  of  a  nation  grows  it  neces- 
sarily attracts  the  precious  metals  because  a  multiplication  of 
exchanges  leads  to  a  growing  demand  for  money.  These  exporta- 
tions  and  importations  will  depend,  as  Hume  x  had  already  shown, 
upon  the  relative  cheapness  or  dearness  of  money.  What  is  true 
of  metallic  money  is  also  true  of  a  special  kind  of  money  known 
as  bank-notes.  Smith  has  given  us  a  vivid  description  of  the  functions 
of  banks,  and  especially  of  the  fortunes  of  the  most  famous  bank  of 
this  period,  the  Bank  of  Amsterdam.  This  afforded  him  another 
opportunity  of  demonstrating  how  the  quantity  of  notes  offered 
spontaneously  adapts  itself  to  the  quantity  demanded.  If  banks 
issue  more  notes  than  the  circulation  warrants  prices  will  rise.  Buy- 
ing from  foreign  countries  will  be  resorted  to  and  the  notes  will  be 
returned  to  the  banks  to  be  exchanged  for  gold  and  silver — the  only 
international  money.  The  banks  clearly  have  no  interest  in  issuing 
too  many  notes,  because  it  involves  a  greater  metallic  reserve  as 
the  result  of  the  more  frequent  demands  for  payment  which  they 
will  have  to  face.  Of  course,  "  every  particular  banking  company 
has  not  always  understood  or  attended  to  its  own  particular  interest, 
and  the  circulation  has  frequently  been  overstocked  with  paper 
money."  2  But  this  does  not  affect  the  main  principle,  and  we  have 
one  further  proof  of  the  spontaneous  activity  of  the  economic 
mechanism. 

We  have  now  reviewed  some  of  Smith's  principal  themes,  and  we 
have  seen  how  every  phenomenon  impresses  him  in  the  same  fashion. 
Had  space  permitted  we  might  have  cited  other  examples  all  pointing 
to  the  same  conclusion.8  This  conception  of  spontaneity  and  wise 
beneficence  is  by  no  means  the  product  of  mere  a  priori  thinking.  It 
was  no  abstract  theory  that  needed  the  backing  of  a  rigid  demonstra- 
tion. It  was  a  belief  gradually  borne  in  upon  him  in  the  course  of 

1  Hume's  treatment  of  the  quantity  theory  of  money  in  his  essays  on  Money 
and  The  Balance  of  Trade  is  much  clearer  than  Smith's. 

1  Wealth  of  Nations,  Book  II,  chap.  2  ;  Cannan,  vol.  i,  p.  285. 

*  For  instance,  a  high  rate  of  exchange  immediately  readjusts  the  commercial 
indebtedness  of  nations.  (Ibid.,  Book  IV,  chap.  1  ;  vol.  i,  p.  400.)  Elsewhere' 
he  points  out  that  the  advantages  enjoyed  by  Europe  from  the  possession  of 
colonies  were  not  exactly  Bought  by  her.  The  search  for  colonies,  their  discovery 
and  exploitation,  all  this  was  undertaken  without  any  preconceived  plan,  and 
in  spite  of  the  disastrous  regulations  imposed  by  European  Governments.  (Ibid., 
Book  TV,  chap.  7,  part  ii  ;  vol.  ii,  pp.  90,  91.) 


86  ADAM  SMITH 

his  review  of  the  economic  field.  This  is  characteristic  of  all  his 
thought,  and  with  every  new  vista  we  are  reminded  of  it.  The 
conclusion  is  hinted  at  again  and  again,  and  the  impression  left  upon 
the  reader's  mind  is  that  no  other  conclusion  could  ever  be  possible. 
Smith  thought  of  the  economic  order  as  an  organism — the  creation 
of  a  thousand  human  wills  unconscious  of  the  end  whither  they  are 
tending,  but  all  of  them  obedient  to  the  impulse  of  one  instinctive, 
powerful  force.  This  force,  the  root  of  all  economic  activity,  its 
constancy  and  uniformity  triumphant  over  every  artificial  obstacle 
and  giving  unity  to  the  whole  system,  what  is  it  ? 

We  have  already  encountered  it  on  more  than  one  occasion.  It 
is  personal  interest,  or,  as  Smith  prefers  to  call  it,  "  the  natural  effort 
of  every  individual  t«  better  his  own  condition."  1  Hidden  deep  in 
the  heart  of  every  individual  lies  this  essential  spring  of  human  life 
and  social  progress. 

Doubtless  it  is  not  the  only  one.  Smith  is  never  exclusive.  He 
knew  that  there  were  other  passions  2  besides  self-interest,  and  he  is 
not  afraid  of  naming  them,  as  when  he  attributes  an  economic 
revolution  which  had  such  beneficial  effects  as  the  emancipation  of 
the  rural  classes  to  "  the  most  childish  vanity  of  proprietors."  * 
Neither  did  he  omit  to  point  out  that  personal  interest  is  not  equally 
strong  in  the  breast  of  every  one,  and  that  there  is  the  greatest 
diversity  in  human  motives.  All  this  he  had  forgotten,  according  to 
some  of  his  critics,  while  others  charge  him  with  the  creation  of  the 
homo  aeconomicus,  a  poor  representation  of  reality  and  a  mere  auto- 
maton exclusively  guided  by  material  interests.  Someone  has 
remarked  that  if  you  add  to  this  figure  a  tinge  of  patriotism  you  have 
a  faithful  picture  of  the  Englishman  and  Scotsman  of  his  day.  Had 
he  been  acquainted  with  Germans  or  Frenchmen,  with  their  less 
sordid  attachment  to  material  gain,  he  might  have  judged  differently. 
It  may  be  that  our  reading  of  him  is  incorrect.  He  seems  to  have 
taken  care  to  note  that  his  remarks  do  not  apply  to  all,  but  only 
to  the  generality  of  men.  He  continually  recalls  the  fact  that 
he  is  speaking  of  men  of  common  understanding,4  or  of  those  gifted 

1  Wealth  of  Nations,  Book  IV,  chap.  5  ;  Caiman,  vol.  i,  p.  324  ;  Book  II, 
chap.  9  ;  vol.  ii,  p.  43  ;  Book  IV,  chap.  9  ;  vol.  ii,  p.  172. 

1  "  It  is  thus  that  the  private  interests  and  passions  of  individuals  naturally 
dispose  them  to  turn  their  stock  towards  the  employments  which  in  ordinary 
cases  are  most  advantageous  to  the  society."  The  word  "  passion  "  was  not 
inserted  by  chance.  It  occurs  no  less  than  three  times  on  the  same  page.  (Ibid., 
Book  IV,  chap.  7,  part  iii ;  vol.  ii,  p.  129.) 

3  Ibid.,  Book  III,  chap.  4  ;  vol.  i,  pp.  389,  390. 

4  Ibid.,  Book  II,  chap.  1,  in  fine  ;  vol.  i,  p.  267. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       87 

with  common  prudence.1  He  knew  well  enough  that  the  principles 
of  common  prudence  do  not  always  govern  the  conduct  of  every 
individual,  but  he  was  of  opinion  that  they  always  influenced 
that  of  the  majority  of  every  class  and  order.2  His  reasoning  is 
applicable  to  men  en  masse,  and  not  to  individuals  in  particular. 
Moreover,  he  does  not  deny  that  man  may  be  unacquainted  with 
or  may  even  entirely  ignore  his  own  interest.  We  have  just  quoted 
a  passage  wherein  he  remarks  that  bankers  who  temporarily  issue  too 
many  notes  are  at  that  moment  ignorant  of  their  own  interests. 

These  reservations  notwithstanding,  and  full  account  being  taken 
of  all  the  exceptions  to  the  principle  as  laid  down  by  Smith,  it  is  still 
true  to  say  that  as  a  general  thesis  he  considers  "  the  natural  effort 
of  every  individual  to  better  his  own  condition  " — that  is,  personal 
interest — as  the  fundamental  psychological  motive  in  political 
economy.  Any  reference  to  the  case  of  business  men  who  are  really 
actuated  by  a  desire  to  take  general  welfare  as  their  guide  in  matters 
of  conduct  is  treated  with  a  measure  of  scepticism  which  it  is  difficult 
not  to  share.  "  I  have  never  known  much  good  done  by  those  who 
affected  to  trade  for  the  public  good.  It  is  an  affectation,  indeed, 
not  very  common  among  merchants,  and  very  few  words  need  be 
employed  in  dissuading  them  from  it."  8  Not  that  sentiment  does 
not  play  a  part,  and  a  very  important  part,  in  the  philosophy  of 
Smith ;  but  sentiment,  or  sympathy,  as  he  calls  it,  has  the  domain 
of  morality  for  its  own,  while  interest  dominates  that  of  economics. 
All  his  thinking  led  him  to  a  firm  belief  in  a  spontaneous  economic 
order  founded  and  guided  by  self-interest. 

Comparison  with  the  Physiocratic  doctrine  concerning  the 
natural  and  essential  order  of  societies  is  illuminating.  To  the 
Physiocrats  the  "  natural  order  "  implied  a  system — an  ideal.  It 
required  a  genius  to  discover  it,  and  only  an  enlightened  despotism 
could  realise  it.  For  Smith  the  **  spontaneous  order  "  was  a  fact. 
It  was  not  a  thing  to  be  brought  into  being.  It  already  existed.  It 
was  doubtless  held  in  check  by  a  hundred  imperfections,  including, 
among  others,  the  stupidity  of  human  legislation.4  But  it  was 
triumphant  over  them  all.  Beneath  the  artificial  constitution  of 
society  lay  the  natural  constitution  which  completely  dominated  it. 

1  Wealth  of  Nations,  Book  II,  chap.  4,  beginning  of  chapter  ;  Cannan,  vol.  i, 
p.  332. 

»  Ibid.,  Book  II,  chap.  2  ;  vol.  i,  p.  278. 

1  Ibid.,  Book  IV,  chap.  2  ;  vol.  i,  p.  421.  After  having  just  said :  "  Bj 
pursuing  hia  own  interest,  he  frequently  promotes  that  of  the  society  more 
effectually  than  when  he  really  intends  to  promote  it." 

•  Ibid.,  Book  IV,  chap.  5  ;  vol.  ii,  p.  43. 


88  ADAM  SMITH 

This  natural  constitution,  which  for  the  Physiocrats  was  nothing 
more  than  an  ideal,  Smith  discovered  in  actual  operation,  and  he  was 
able  to  describe  its  modus  operandi.  Political  economy,  which  with 
Quesnay  was  nothing  better  than  a  system  of  rules  and  regulations, 
became  in  Smith's  hands  a  natural  science  based  upon  the  observation 
and  analysis  of  existing  facts.  In  a  passage  written  in  his  usual 
lucid  style  Smith  shows  the  superiority  of  his  system  over  that  of  the 
Physiocrats.  "  Some  speculative  physicians  seem  to  have  imagined 
that  the  health  of  the  human  body  could  be  preserved  only  by  a 
certain  precise  regimen  of  diet  and  exercise,  of  which  every,  the 
smallest,  violation  necessarily  occasioned  some  degree  of  disease  or 
disorder  proportioned  to  the  degree  of  the  violation.  .  .  .  Mr. 
Quesnai,  who  was  himself  a  physician,  and  a  very  speculative  phy- 
sician, seems  to  have  entertained  a  notion  of  the  same  kind  concerning 
the  political  body,  and  to  have  imagined  that  it  would  thrive  and 
prosper  only  under  a  certain  precise  regimen,  the  exact  regimen  of 
perfect  liberty  and  perfect  justice.  He  seems  not  to  have  considered 
that  in  the  political  body,  the  natural  effort  which  every  man  is 
continually  making  to  better  his  own  condition,  is  a  principle  of 
preservation  capable  of  preventing  and  correcting,  in  many  respects, 
the  bad  effects  of  a  political  oeconomy  in  some  degree  both  partial 
and  oppressive.  Such  a  political  oeconomy,  though  it  no  doubt  retards 
more  or  less,  is  not  always  capable  of  stopping  altogether  the  natural 
progress  of  a  nation  towards  wealth  and  prosperity,  and  still  less  of 
making  it  go  backwards.  If  a  nation  could  not  prosper  without  the 
enjoyment  of  perfect  liberty  and  perfect  justice,  there  is  not  in  the 
world  a  nation  which  could  ever  have  prospered.  In  the  political 
body,  however,  the  wisdom  of  nature  has  fortunately  made  ample 
provision  for  remedying  many  of  the  bad  effects  of  the  folly  and 
injustice  of  man ;  in  the  same  manner  as  it  has  done  in  the  natural 
body,  for  remedying  those  of  his  sloth  and  intemperance."  l 

This  passage  leads  us  to  his  second  thesis,  namely,  the  excellence 
of  these  economic  institutions.  As  we  have  already  remarked,  these 
two  ideas  of  spontaneity  and  excellence,  though  confused  by  Smith, 
ought  to  be  treated  apart.  His  naturalism  and  optimism  are 
inseparable,  and  both  of  them  find  expression  in  the  same  paragraph. 
The  passage  just  quoted  affords  a  proof  of  this.  Personal  interest 
not  only  creates  and  maintains  the  economic  organism,  but  at  the 
same  time  ensures  a  nation's  progress  towards  wealth  and  prosperity. 
The  institutions  are  not  only  natural,  but  are  also  beneficial.  They 
interest  him  not  merely  as  objects  of  scientific  curiosity,  but  also  as 
1  Wealth  of  Nations,  Book  IV,  chap.  9  ;  Carman,  vol.  ii,  p.  172. 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH       89 

the  instruments  of  public  weal.  Herein  lies  their  chief  attraction 
for  him,  for  political  economy  to  him  was  more  of  a  practical  art 
than  a  science.1 

But  this  is  hardly  emphatic  enough.  Natural  economic  insti- 
tutions are  not  merely  good  :  they  are  providential.  Divine  Pro- 
vidence has  endowed  man  with  a  desire  to  better  his  condition, 
whence  arises  the  **  natural  "  social  organism  :  so  that  man,  following 
where  this  desire  leads,  is  really  accomplishing  the  beneficent  designs 
of  God  Himself.  By  pursuing  his  own  interest,  man  "  is  in  this  as 
in  many  other  cases  "  (he  is  writing  now  of  the  employment  of 
capital)  "  led  by  an  invisible  hand  to  promote  an  end  which  was  no 
part  of  his  intention."  2  The  Physiocrats  could  hardly  have  improved 
upon  that. 

We  can  scarcely  share  in  his  optimism  to-day.  But  it  has  played 
too  prominent  a  role  in  the  history  of  ideas  not  to  detain  us  for  a 
moment.  We  must  examine  the  arguments  upon  which  it  is  based 
and  endeavour  to  grasp  their  import. 

Let  us  note,  in  the  first  place,  that  every  example  hitherto  deduced 
with  a  view  to  proving  the  spontaneity  of  economic  institutions  at 
the  same  time  furnishes  a  demonstration  of  the  beneficial  effects  of 
personal  interest.  Owing  to  a  coincidence  by  no  means  fortuitous 
every  institution  mentioned  by  Smith  as  owing  its  existence  to  the 
prevalence  of  action  of  this  kind  is  at  the  same  time  favourable  to 
economic  progress.  Division  of  labour,  the  invention  of  money,  and 
the  accumulation  of  capital  are  so  many  natural  social  facts  that 
also  increase  wealth.  The  adaptation  of  demand  and  supply,  the 
distribution  of  money  according  to  the  need  for  a  circulating  medium, 
the  growth  of  population  according  to  the  demand  for  it,  are  so 
many  spontaneous  phenomena  which  ensure  the  efficient  working  of 
economic  society.  A  perusal  of  Smith's  work  leaves  us  with  the 
impression  that  these  spontaneous  institutions  must  also  be  the 
best. 

The  general  proof  of  this  thesis  is  scattered  throughout  the 
whole  book.  But  there  was  one  point  especially  upon  which  Smith 
was  very  anxious  to  show  complete  accord  between  public  and 
private  interest.  This  was  in  connection  with  the  investment  of 
capital.  In  his  opinion  capital  spontaneously  seeks,  and  as  spon- 

1  "  The  great  object  of  the  political  oeconomy  of  every  country,  is  to  increase 
the  riches  and  power  of  that  country."  ( Wealth  of  Nations,  Book  II,  chap.  6  ; 
Carman,  vol.  i,  p.  351.)  The  expression  "  the  political  economy  of  every  count  ry," 
which  Smith  frequently  employed,  might  be  used  in  answer  to  writers  such  as 
Knies,  who  speak  of  the  Universalism  or  Internationalism  of  Smith. 

1  Ibid.,  Book  IV,  chap.  1 ;  vol.  i,  p.  421. 

C.D.  D 


90  ADAM  SMITH 

taneously  finds,  the  most  favourable  field  for  investment — most 
favourable,  that  is  to  say,  to  the  interest  of  society  in  general.  This 
proof  at  first  sight  seems  to  apply  only  to  one  special  fact,  but 
it  really  has  a  more  general  import.  We  know  the  great  stress 
which  Smith  laid  upon  capital.  Division  of  labour  depends  upon 
it,  and  so  does  the  abundance  or  scarcity  of  produce.  It  determines 
the  quantity  of  work  and  fixes  the  limit  of  population.  To  show 
that  the  investment  of  capital  conforms  to  the  general  interest  is  to 
show  that  all  production  is  organised  in  the  manner  most  favourable 
to  national  prosperity. 

Smith  distinguishes  between  four  methods  of  investing  capital : 
in  agriculture,  in  industry,  in  the  wholesale  and  in  the  retail  trades. 
Wholesale  industry  is  further  divided  into  three  classes :  domestic 
trade ;  foreign  trade,  furnishing  the  nation  with  foreign  products ; 
and  the  carrying  trade  which  transports  those  goods  from  one  country 
to  another.  Smith  maintained  that  the  order  in  which  these  various 
forms  of  activity  were  mentioned  was  also  the  order  of  their  utility, 
agriculture  being  the  most  advantageous,  industry  the  second 
best,  etc. 

He  also  proposes  two  criteria  for  testing  this  hierarchy  :  (1 )  the 
quantity  of  productive  labour  put  into  operation  by  means  of  the 
capital  employed  by  each;  (2)  the  amount  of  exchange  value 
annually  added  to  the  revenue  by  each  of  these  employments.  As 
we  pass  from  agriculture  to  the  other  branches,  the  quantity  of 
productive  labour  brought  into  operation  and  the  amount  of  exchange 
value  obtained  gradually  decreases,  and  with  this  decrease  goes  a 
diminishing  utility  for  the  country.  Smith  thought  that  a  nation 
ought  to  employ  its  capital  in  the  way  he  had  suggested.  It  ought 
to  give  the  preference  to  agriculture,  and  engage  in  the  other 
branches  only  as  the  accumulation  of  capital  permitted. 

But  this  is  precisely  what  the  capitalists  would  do  were  they 
entirely  free.  Every  one  of  them,  in  fact,  is  interested  in  keeping 
his  capital  as  near  home  as  possible,  with  a  view  to  better  super- 
vision. Only  as  a  last  resource  does  he  venture  to  engage  in  foreign 
commerce.  Again,  even  among  the  industries  carried  on  in  his  own 
country  every  capitalist  will  preferably  choose  that  which  will  result 
in  the  production  of  the  greatest  exchange  value,  seeing  that  his  profit 
varies  with  the  amount  of  this  exchange  value.  His  investments 
will  accordingly  be  made  in  the  order  mentioned,  an  order  which 
roughly  corresponds  to  the  greater  or  lesser  quantity  of  exchange 
values  produced  by  each  industry.  And  finally,  when  contemplating 
investment  in  foreign  trade  he  will  for  the  same  reason  follow  the 


THE  NATURALISM  AND  OPTIMISM  OF  SMITH      91 

order  specified  above — the  order  of  greatest  general  utility.  Thus  the 
double  desire  of  keeping  one's  capital  within  one's  reach  and  of 
finding  for  it  the  most  lucrative  field  of  investment  leads  every 
capitalist  to  employ  his  capital  in  the  fashion  which  is  most  advan- 
tageous for  the  nation.  Such  is  the  argument,  whatever  its  value. 

Even  if  we  adopted  his  criteria  it  is  obvious  that  his  classification 
is  altogether  too  arbitrary.  How,  for  example,  can  we  justify  the 
statement  that  an  industrial  enterprise  or  the  carrying  trade  employs 
less  capital  than  agriculture  ?  The  exact  contrary  would  be  nearer 
the  truth,  and  agriculture  ought  to  be  given  a  much  more  modest 
position.  Moreover,  the  conception  of  such  a  hierarchy  does  not 
accord  very  well  with  the  theory  of  division  of  labour,  which  seeks 
to  put  the  various  forms  of  human  activity  more  nearly  on  an 
equality. 

As  a  matter  of  fact  we  cannot  even  accept  a  criterion  which  takes 
the  amount  of  exchange  values  furnished  by  an  industry  as  the  test 
of  its  social  utility.  This  increase  in  the  quantity  of  exchange  values 
simply  proves  that  the  demand  for  the  goods  concerned  is  stronger 
than  the  demand  for  some  others.  When  capital  flows  into 
certain  industries  it  only  points  to  the  spontaneous  satisfaction  of 
social  demand.  But  social  demand  and  social  utility  are  not 
necessarily  the  same.  Demand  is  the  outcome  of  human  desires, 
and  its  intensity  depends  upon  the  revenue  drawn  by  the  individual. 
But  we  can  neither  regard  these  desires  in  themselves  or  the  system 
of  distribution  that  makes  such  desires  "  effective  "  as  sufficient  tests 
of  social  utility.  And  to  say  that  production  follows  demand  is  to 
prove  nothing  at  all.  Smith  himself  seems  to  have  realised  this ; 
hence  his  other  criterion — the  quantity  of  productive  labour  em- 
ployed by  capital.  According  to  this  test  those  industries  that 
employ  the  least  amount  of  machinery  and  the  greatest  amount  of 
hand  labour  are  the  most  useful — quite  an  untenable  view. 

A  demonstration  of  a  somewhat  similar  character  has  been 
attempted  by  the  Hedonistic  school.  They  have  shown  how  free 
competition  always  tends  to  direct  production  into  such  channels  as 
will  result  in  maximum  utility,  or,  in  other  words,  that  it  affords  the 
best  method  of  satisfying  the  actual  demands  of  the  market.  But 
they  have  been  very  careful  to  note  that  social  utility  and  ophelimity 
are  two  very  different  expressions  that  must  never  be  confused, 
and  that  they  have  failed  to  find  any  scientific  test  of  social  utility. 

Smith's  argument  is  unsatisfactory,  and  its  foundation  untrust- 
worthy. We  do  not  forget  that  his  optimism  is  based  not  so 
much  upon  this  specious  demonstration  as  upon  the  great  number 


92  ADAM  SMITH 

of  observations  which  he  had  occasion  to  make  in  the  course  of  his 
work.  This  idea  of  a  harmony  between  private  interest  and  the 
general  well-being  of  society  was  not  put  forward  as  a  rigidly  demon- 
strable a  priori  theory,  open  to  no  exceptions.  It  was  rather  a 
general  view  of  the  whole  position — the  conclusion  drawn  from 
repeated  observations,  the  resume  of  a  detailed  inquiry  which 
had  covered  every  corner  of  the  economic  field.  A  particular  process 
of  reasoning  may  have  helped  to  confirm  this  conclusion,  but  the 
reasoning  itself  was  largely  based  upon  experience,  the  universal 
experience  of  history.  It  was  the  study  of  this  experience  that  led 
to  the  discovery  of  a  "  vital "  principle  of  health  and  progress  in  the 
"  body  social."  Smith  would  have  been  the  first  to  oppose  the 
incorporation  of  his  belief  in  any  dogma.  He  was  content  to  say 
that  "  most  frequently  "  and  in  a  "  majority  of  cases  "  general 
interest  was  satisfied  by  the  spontaneous  action  of  private  interest. 
He  was  also  the  first  to  point  out  instances — in  the  case  of  merchants 
and  manufacturers,  for  example — where  the  particular  and  the 
general  interest  came  into  conflict.  We  might  cite  many  charac- 
teristic passages  in  which  he  takes  pains  to  qualify  his  optimism. 

Absolute  his  optimism  was  not,  neither  was  it  universal.  In  fact, 
it  would  not  be  difficult  to  prove  that  it  was  never  intended  to  apply 
to  anything  other  than  production.  Nowhere  does  the  great  Scotch 
economist  pretend  that  the  present  distribution  of  wealth  is  the  justest 
possible — a  trait  that  distinguishes  him  from  the  optimists  of  Bastiat's 
school.  His  optimism  deserted  him  when  he  reached  that  portion  of 
his  subject.  On  the  contrary,  he  showed  that  landed  proprietors  as 
well  as  capitalists  "  love  to  reap  where  they  have  not  sown,"  that  in- 
equalities in  social  position  give  masters  an  advantage  in  bargaining 
with  their  men.1  In  more  than  one  passage  he  speaks  of  interest  and 
rent  as  deductions  from  the  produce  of  labour.2  Smith,  indeed, 
might  well  be  regarded  as  a  forerunner  of  socialism.  There  is  no 
difficulty  in  believing,  so  far  as  the  experience  of  old  countries  goes, 
that  "  rent  and  profit  eat  up  wages  and  the  two  superior  orders  of 
people  oppress  the  inferior  one."  3 

It  is  especially  important  that  we  should  make  a  note  of  the 
opinions  of  those  people  who  think  that  Smith  intended  his  optimism 

1  Wealth  of  Nations,  Book  I,  chap.  8  ;  Cannan,  vol.  i,  p.  68.  The  masters 
possess  the  advantage  in  discussion  (1)  because  they  can  combine  much  more 
easily  ;  (2)  becau«a,  thanks  to  their  superior  funds,  they  can  afford  to  wait  while 
"  many  workmen  could  not  subsist  a  week,  few  could  subsist  a  month,  and  scarce 
any  a  year  without  employment." 

1  Cf.  supra,  p.  78. 

•  raid.,  Book  IV,  chap.  7,  part  ii,  the  beginning  ;   vol.  ii,  p.  67. 


ECONOMIC  LIBERTY  AND  INTERNATIONAL  TRADE    98 

to  extend  to  distribution  as  well  as  to  production.  As  a  matter 
of  fact  he  was  too  level-headed  to  entertain  any  such  idea.  Even 
Say  himself  in  the  last  edition  of  his  Treatise  expresses  some  doubts 
as  to  the  equity  of  the  present  system  of  distribution.1  Smith 
was  not  really  concerned  with  the  question  at  all.  It  is  only  at  a 
much  later  date,  when  the  socialists  had  demonstrated  the  importance 
of  the  problem,  that  we  hear  of  this  belief  in  the  beneficence  of 
economic  institutions.  It  really  represents  a  reaction  against  the  ., 
socialistic  teaching  and  an  attempt  at  a  justification  of  the  present 
methods  of  distribution. 

We  must  beware  of  confusing  Smith's  optimism  with  that  of 
modern  Hedonism,  or  of  identifying  it  with  Bastiat's  answer  to  the 
socialists.  It  lacks  the  scientific  precision  of  the  one  and  has  none 
of  the  apologetic  tone  of  the  other.  It  is  little  more  than  a  reflection 
prompted  by  the  too  naive  confidence  of  the  eighteenth  century  in 
the  bounty  of  "  nature,"  and  an  expression  of  profound  conviction 
rather  than  the  conclusion  of  a  logical  argument. 


Ill :   ECONOMIC  LIBERTY  AND 
INTERNATIONAL  TRADE 

THE  practical  conclusion  to  which  naturalism  leads  and  to  which 
Smith's  optimism  points  is  economic  liberty.  So  naturally  does  it 
proceed  from  what  we  have  just  said  that  the  reader  finds  himself 
quite  prepared  for  Smith's  celebrated  phrases  :  "  All  systems  either 
of  preference  or  of  restraint,  therefore,  being  thus  completely  taken 
away,  the  obvious  and  simple  system  of  natural  liberty  establishes 
itself  of  its  own  accord.  Every  man,  as  long  as  he  does  not  violate 
the  laws  of  justice,  is  left  perfectly  free  to  pursue  his  own  interest 
his  own  way,  and  to  bring  both  his  industry  and  capital  into  com- 
petition with  those  of  any  other  man,  or  order  of  men."  As  to 
the  Government,  or  "  sovereign,"  as  Smith  calls  him,  "  he  is  com- 
pletely discharged  from  a  duty,  in  the  attempting  to  perform  which 
he  must  always  be  exposed  to  innumerable  delusions,  and  for  the 
proper  performance  of  which  no  human  wisdom  or  knowledge 
could  ever  be  sufficient ;  the  duty  of  superintending  the  industry 
of  private  people,  and  of  directing  it  towards  the  employments 
most  suitable  to  the  interests  of  the  society." 

Smith,  following  the  Physiocrats,  but  in  a  more  comprehensive 

1  Say,  speaking  of  the  working  classes,  remarks  :  "  Are  we  quite  certain  that 
the  workman  obtains  that  share  of  wealth  which  is  exactly  proportioned  to  the 
amount  which  he  has  contributed  to  production  ?  "  (Treatise,  6th  ed.,  p.  110.) 


94  ADAM  SMITH 

and  scientific  fashion,  finds  himself  driven  to  the  same  conclusion, 
namely,  the  wisdom  of  non-intervention  by  the  State  in  matters 
economic.1 

But  here,  as  elsewhere  in  his  work,  the  sense  of  the  positive  and 
the  concrete,  so  remarkable  in  Smith,  prevents  his  being  content 
with  a  general  demonstration.  He  is  not  satisfied  with  proving  the 
inefficiency  of  intervention  as  compared  with  the  efficiency  of  those 
institutions  which  are  spontaneously  created  by  society  itself,  but 
he  attempts  to  show  that  the  State,  by  its  very  nature,  is  unfitted 
for  economic  functions.  His  arguments  have  been  the  arsenal  from 
which  the  opponents  of  State  intervention  have  been  supplied  with 
ammunition  ever  since. 

Let  us  briefly  recall  them. 

"  No  two  characters  seem  more  inconsistent  than  those  of  trader 
and  sovereign." f  Governments  are  "  always,  and  without  any 
exception,  the  greatest  spendthrifts  in  the  society."  3  The  reasons  for 
this  are  numerous.  In  the  first  place,  they  employ  money  which  has 
been  gained  by  others,  and  one  is  always  more  prodigal  of  the  wealth 
of  others  than  of  one's  own.  Moreover,  the  Government  is  too  far 
removed  from  the  centres  of  particular  industries  to  give  them  that 
minute  attention  which  they  deserve  if  they  are  going  to  prosper. 
"  The  attention  of  the  sovereign  can  be  at  best  but  a  very  general  and 
vague  consideration  of  what  is  likely  to  contribute  to  the  better 
cultivation  of  the  greater  part  of  his  dominions.  The  attention  of 
the  landlord  is  a  particular  and  minute  consideration  of  what  is 
likely  to  be  the  most  advantageous  application  of  every  inch  of 
ground  upon  his  estate."  4 

This  necessity  for  a  thorough  cultivation  of  the  soil  and  for  the 
best  employment  of  capital,  for  direct  and  careful  superintendence, 
is  an  idea  to  which  he  continually  reverts.  He  regrets,  among 
other  things,  that  the  growth  of  public  debts  causes  a  portion  of  the 
land  and  the  national  capital  to  pass  into  the  hands  of  fund-holders, 
who  are  doubtless  interested  in  the  good  administration  of  a  country, 
but  "  are  not  interested  in  the  good  condition  of  any  particular  por- 
tion of  land,  or  in  the  good  management  of  any  particular  portion 
of  capital  stock."  6 

1  Wealth  of  Nations,  Book  IV,  chap.  9,  in  fine  ;  Caiman,  vol.  ii,  p.  184. 

1  Ibid.,  Book  V,  chap.  2,  part  i ;  vol.  ii,  p.  304.  He  makes  exception  only 
of  the  post-office,  "  perhaps  the  only  mercantile  project  which  has  been  success- 
fu'ly  managed  by,  I  believe,  every  sort  of  government."  (P.  303.) 

«  Ibid.,  Book  II,  chap.  3  ;  vol.  i,  p.  328. 

•  Ibid.,  Book  V.  chap.  2,  part  ii,  art.  1 ;  vol.  ii,  p.  318. 

•  Ibid.,  Book  V,  chap.  3  ;  vol.  ii,  p.  413. 


ECONOMIC  LIBERTY  AND  INTERNATIONAL  TRADE    95 

Lastly,  the  State  is  an  inefficient  administrator  because  its  agents 
are  negligent  and  thriftless,  not  being  directly  interested  in  adminis- 
tration, but  paid  out  of  public  funds'.  Should  the  administration 
of  the  land  pass  into  the  hands  of  the  State  he  exclaims  that  not  a 
fourth  of  the  present  produce  would  ever  be  raised,  because  of  "  the 
negligent,  expensive,  and  oppressive  management  of  his  factors  and 
agents." l  On  the  contrary,  he  proposes  that  the  remainder  of  the 
common  land  should  be  distributed  among  individuals.  On  this 
point  European  Governments  have  followed  his  advice  somewhat 
too  closely.*  For  the  same  reason — the  necessity  for  stimulating 
personal  interest  wherever  possible — he  commends,  instead  of  a 
fixed  salary  for  public  officers,  payment  by  those  who  benefit  by 
their  services,  such  payment  in  every  case  to  be  in  strict  proportion 
to  the  zeal  and  activity  displayed.  This  was  to  apply,  for  example, 
to  judges  and  professors.* 

State  administration  is  accordingly  a  pis  aller,  and  intervention 
ought  to  be  strictly  limited  to  those  cases  in  which  individual  action 
is  impossible.  Smith  recognises  three  functions  only  which  the  State 
can  perform,  namely  the  administration  of  justice,  defence,  "  and, 
thirdly,  the  duty  of  erecting  and  maintaining  certain  public  works  and 
certain  public  institutions,  which  it  can  never  be  for  the  interest 
of  any  individual,  or  small  number  of  individuals,  to  erect  and 
maintain  ;  because  the  profit  could  never  repay  the  expence  to  any 
individual  or  small  number  of  individuals,  though  it  may  frequently 
do  much  more  than  repay  it  to  a  great  society."  4 

We  must  beware,  however,  lest  we  exaggerate  this  point. 
Although  Smith,  in  the  majority  of  cases,  preferred  individual  action, 
we  must  not  conclude  from  this  that  he  had  unlimited  confidence  in 
individuals.  Smith's  individualism  was  of  a  particular  kind.  It 
was  not  a  mere  blind  preference  for  every  private  enterprise,  for  he 
knew  that  industry  frequently  falls  a  prey  to  the  spirit  of  monopoly. 
**  People  of  the  same  trade  seldom  meet  together,  even  for  merriment 
and  diversion,  but  the  conversation  ends  in  a  conspiracy  against  the 
public,  or  in  some  contrivance  to  raise  prices."  6  In  order  that  a 
private  enterprise  may  be  useful  for  the  community  two  conditions 
are  necessary.  The  entrepreneur  must  be  :  (1 )  actuated  by  personal 
interest ;  (2)  his  actions  must  by  means  of  competition  be  kept 

1  Wealth  of  Nations,  Book  V,  chap.  2,  part  ii  ;  Caiman,  vol.  ii,  p.  308. 
1  Cf.   particularly  Burgin,  Lea  Communaux  et  la  Revolution  fran^aise,  in 
Nouvette  Revue  historique  de  Droit,  Nov. -Dec.  1908. 

•  Wealth  of  Nations,  Book  V,  chap.  1,  part  iii,  art.  2  ;  Caiman,  vol.  ii,  p.  250. 

•  Ibid.,  Book  IV,  chap.  9  ;  vol.  ii,  p.  185. 

•  Ibid.,  Book  I,  chap.  10,  part  ii ;  vol.  i,  p.  130. 


96  ADAM  SMITH 

within  the  limits  of  justice.  Should  either  of  these  two  conditions 
be  wanting,  the  public  would  run  the  risk  of  losing  as  much  by 
private  as  they  would  by  State  enterprise. 

Thus  Smith  throughout  remains  very  hostile  to  certain  collective 
enterprises  of  a  private  nature,  such  as  joint-stock  companies,1 
because  of  the  absence  of  personal  interest.  The  only  exceptions 
which  he  would  tolerate  are  banks,  insurance  companies,  and  com- 
panies formed  for  the  construction  or  maintenance  of  canals  or  for 
supplying  great  towns  with  water,  for  the  management  of  such 
undertakings  can  easily  be  reduced  to  a  kind  of  routine,  "  or  to  such 
a  uniformity  of  method  as  admits  of  little  or  no  variation."  2 

His  opposition  to  every  kind  of  monopoly  granted  either  to  an 
individual  or  to  a  company  is  even  more  pronounced.  A  whole 
chapter  is  devoted  to  an  attack  upon  the  great  trading  companies 
of  the  seventeenth  and  eighteenth  centuries,  which  were  created 
with  a  view  to  the  development  of  colonial  trade,  and  of  which  the 
East  India  Company  was  the  most  famous. 

One  other  observation  remains  to  be  made.  Non-intervention 
for  Smith  was  a  general  principle,  and  not  an  absolute  rule.  He  was 
no  doctrinaire,  and  he  never  forgot  that  to  every  rule  there  are  some 
exceptions.  An  interesting  list  could  be  made,  giving  all  the  cases 
in  which,  according  to  Smith,  the  legitimacy  of  State  intervention 
was  indisputable — legal  limitation  of  interest,3  State  administration 
of  the  post-office,  compulsory  elementary  education,  State  exami- 
nations as  a  condition  of  entry  into  the  liberal  professions  or  to 
any  post  of  confidence  whatever,  bank-notes  of  a  minimum  value 
of  £5,  etc.*  In  a  characteristic  phrase  he  gave  expression  to  his 
feeling  on  the  question  of  restricting  the  liberty  of  banks.  "  Such 
regulations  may,  no  doubt,  be  considered  as  in  some  respects 
a  violation  of  natural  liberty.  But  those  exertions  of  the  natural 
liberty  of  a  few  individuals,  which  might  endanger  the  security  of 
the  whole  of  society,  are,  and  ought  to  be,  restrained  by  the  laws 
of  all  governments ;  of  the  most  free,  as  well  as  of  the  most 

1  Wealth  of  Nations,  Book  V,  chap.  1,  part  iii,  art.  1;  Carman,  vol.  ii,  p.  233. 

*  Ibid.,  Book  V,  chap.  1,  part  iii,  art.  1;  vol.  ii,  p.  246. 

*  Ibid.,  Book  II,  chap.  4,  in  fine.     It  is  probable  that  his  conversion  to 
belief  in  absolute  liberty  took  place  later  as  the  result  of  his  perusal  of  Bentham's 
Defence  of  Usury,  published  in  1787,  advocating  the  right  of  taking  interest. 
This  seems  to  have  been  the  case  if  we  can  credit  the  report  of  a  conversation 
which  Smith  had  with  one  of  Bentham's  friends,  mentioned  in  a  letter  written 
to  Bentham  by  another  cf  hi»  friends — George  Wilson.     Cf.  John  Rae,  Life  of 
Adam  Smith,  p.  423. 

*  Wealth  of  Nations.  Book  II,  chap.  2  ;  Cannan,  vol.  5,  p.  307. 


ECONOMIC  LIBERTY  AND  INTERNATIONAL  TRADE    97 

despotical."  1  Despite  these  reservations  it  is  still  very  evident  that 
the  whole  of  Smith's  work  is  a  plea  for  the  economic  freedom  of  the 
individual.  It  is  an  eloquent  appeal  against  the  Mercantilist  policy 
and  a  violent  attack  upon  every  economic  system  inspired  by  it. 

On  this  point  there  is  absolute  agreement  between  the  work  done 
by  Smith  in  England  and  that  carried  on  at  the  same  time  by  the 
Physiocrats  in  France.  Both  in  foreign  and  domestic  trade  pro- 
ducers, merchants,  and  workmen  were  hemmed  in  by  a  network  of 
restrictions  either  inherited  from  the  traditions  of  the  Middle  Ages 
or  imposed  by  powerful  party  interests  and  upheld  by  false  economic 
theories.  The  corporations  still  existed  in  the  towns  ;  although  their 
regulations  could  not  be  applied  to  industries  born  after  the  passing 
of  Elizabeth's  famous  law  concerning  apprenticeship.  The  Colbertian 
system,  with  its  mob  of  officials  entrusted  with  the  task  of  super- 
intending the  processes  of  production,  of  examining  the  weight,  the 
length,  and  the  quality  of  the  material  employed,  was  still  a  grievance 
with  the  woollen  manufacturers.2  The  fixing  of  the  duration  of 
apprenticeship  at  seven  years,  the  limitation  of  the  number  of 
apprentices  in  the  principal  industries,  the  obstacles  put  in  the  way 
of  the  mobility  of  labour  by  the  Poor  Law  and  by  the  series  of 
statutes  passed  since  the  reign  of  Elizabeth,  fettered  the  movement 
of  labour  and  the  useful  employment  of  capital.  Smith  opposed 
these  measures  with  the  whole  of  his  energy.  England,  unlike 
France,  had  fortunately  escaped  internal  restrictions  upon  trade,  but 
the  restraints  placed  upon  foreign  trade  still  kept  England  and 
Ireland  commercially  separated.  These  checks  upon  foreign  trade 
proved  as  irksome  in  England  as  they  did  everywhere  else.  Manu- 
factured goods  from  foreign  countries  were  heavily  taxed  or  were 
prohibited  entrance  altogether.  Certain  natural  products,  e.g.  French 
wine,  were  similarly  handicapped  ;  the  importation  of  a  number  of 
commodities  necessary  for  national  industry  was  banned  ;  a  narrow 
and  oppressive  policy  regarded  the  colonies  as  the  natural  purveyors 

1  Wealth  of  Nations,  Book  II,  chap.  2  ;  Carman,  vol.  i,  p.  307.  He  continues  : 
"  The  obligation  of  building  party  walls  in  order  to  prevent  the  communication 
of  fire,  is  a  violation  of  natural  liberty,  exactly  of  the  same  kind  with  the  regula- 
tions of  the  banking  trade  which  are  here  proposed."  This  passage  proves  that 
Smith  was  in  favour  of  public  regulations  which  would  further  the  material 
security  of  the  citizens.  Elsewhere  he  shows  his  partiality  for  adopting  hygienic 
precautions  against  the  spread  of  contagious  diseases  (Book  V,  chap.  1,  part  iii ; 
rol.  ii,  p.  272). 

*  Cf.  Mantoux,  op.  cit.,  pp.  65-66.  This  work  gives  most  interesting  details 
bearing  upon  all  the  points  mentioned  here.  Internal  restrictions  are  criticised 
by  Smith  in  the  second  part  of  chap.  10  of  Book  I. 

D' 


98  ADAM  SMITH 

of  raw  materials  for  the  mother-country  and  the  willing  buyers  of  its 
manufactured  goods.  Against  all  this  mass  of  regulations,  destined, 
it  was  thought,  to  secure  the  supremacy  of  England  among  other 
commercial  nations,  Smith  directed  his  most  spirited  onslaughts. 
The  fourth  book  of  the  Wealth  of  Nations  is  an  eloquent  and  vigorous 
attack  upon  Mercantilism,  admirable  alike  for  the  precision  and  the 
extent  of  its  learning.  It  was  this  section  of  his  work  that  interested 
his  contemporaries  most.  For  us  it  would  have  been  the  least 
interesting  but  for  its  theory  of  international  trade  and  its  criticism 
of  Protection  in  general.  On  this  account,  however,  it  is  of  con- 
siderable importance  in  the  study  of  economic  doctrines. 

In  the  struggle  for  Free  Trade,  as  on  other  points,  Smith  was 
forestalled  by  the  Physiocrats.  But  again  has  he  shown  himself 
superior  in  the  breadth  of  his  outlook.  Physiocratic  Liberalism  was 
the  result  of  their  interest  in  agriculture,  foreign  trade  being  of  quite 
secondary  importance.  Smith,  on  the  other  hand,  considered  foreign 
trade  in  itself  advantageous,  provided  it  began  at  the  right  moment 
and  developed  spontaneously.1  Although  his  point  of  view  is  far 
superior  to  that  of  the  Physiocrats,  even  Smith  failed  to  give  us  a 
satisfactory  theory.  It  was  reserved  for  Ricardo  and  his  successors, 
particularly  John  Stuart  Mill,  to  find  a  solid  scientific  basis  for  the 
theory  of  international  trade.  The  doctrine  of  the  Scotch  economist 
is  somewhat  lame.  But  the  hesitancy  of  a  great  writer  is  often 
interesting,  and  some  of  his  arguments  deserve  to  be  recalled. 

Already  in  our  review  of  his  theory  of  money  we  have  become 
familiar  with  Smith's  criticism  of  the  balance  of  trade  theory.  But 
the  balance  of  trade  theory  is  not  the  whole  of  Protection,  and  we 
find  in  Smith  something  more  than  its  mere  refutation.  In  the 
first  place,  we  have  a  criticism  of  Protectionism  in  general  considered 
in  its  Mercantilist^  aspect,  followed  by  an  attempt  to  demonstrate 
the  positive  advantages  of  international  commerce. 

The  first  criticism  that  he  offers  might  be  summed  up  in  the 
well-known  phrase  :  "  Industry  is  limited  by  capital."  "  The  general 
industry  of  the  society  can  never  exceed  what  the  capital  of  the 
society  can  employ."  But  Protection,  perhaps,  increases  the  quantity 
of  capital  ?  No,  "  for  it  can  only  divert  a  part  of  it  into  a  direction 
into  which  it  might  not  otherwise  have  gone."  But  the  direction 
spontaneously  given  to  their  capital  by  individuals  is  the  most 

1  "  Each  of  those  different  branches  of  trade,  however,  is  not  only  advan- 
tageous, but  necessary  and  unavoidable,  when  the  course  of  things,  without 
any  constraint  or  violence,  naturally  introduces  it,"  says  he,  after  giving  an 
exposition  of  the  respective  advantages  of  the  various  forms  of  economic  activity. 
(Wealth  of  Nations,  Book  II,  chap.  5  ;  Cannan,  vol.  i,  p.  362.) 


favourable  to  a  country's  industry.  Has  not  Smith  demonstrated 
this  already  ?  Protection,  consequently,  is  not  merely  useless ;  it 
may  even  prove  injurious.1 

The  argument  does  not  appear  decisive,  especially  when  we  recall 
the  criticism  of  Smith's  optimism  given  above.  To  borrow  an 
expression  of  M.  Pareto,  it  is  the  maximum  of  ophelimity  and  not 
the  maximum  of  utility  that  is  realised  by  the  capitalists  under  the 
action  of  personal  interest. 

A  second  and  a  more  striking  argument  shows  the  absurdity  of 
manufacturing  a  commodity  in  this  country  at  a  great  expense, 
when  a  similar  commodity  might  be  supplied  by  a  foreign  country 
at  less  cost.  "  It  is  the  maxim  of  every  prudent  master  of  a  family, 
never  to  attempt  to  make  at  home  what  it  will  cost  him  more  to 
make  than  to  buy.  .  .  .  What  is  prudence  in  the  conduct  of  every 
private  family,  can  scarce  be  folly  in  that  of  a  great  kingdom."  a 
It  is  foolish  to  grow  grapes  in  hothouses  in  Scotland  when  better 
and  cheaper  can  be  got  from  Portugal  or  France.  Everybody  is 
convinced  of  that.  But  a  similar  stupidity  prevails  when  we  are 
hindered  by  tariffs  from  profiting  by  the  natural  advantages  which 
foreign  nations  possess  as  compared  with  ourselves.  All  "  the 
mean  rapacity  and  the  monopolizing  spirit  of  merchants  and  manu- 
facturers "  3  was  necessary  to  blind  men  to  their  true  interests 
on  this  point.  According  to  Smith,  there  exists  a  natural  distribu- 
tion of  products  among  various  countries,  resulting  in  an  advantage 
to  all  of  them.  It  is  Protection  that  hinders  our  sharing  in  the 
advantages.  This  is  the  principle  known  as  the  "  territorial  division 
of  labour." 

But  the  argument  is  inconclusive,  for  capital  and  labour  do  not 
circulate  from  one  nation  to  another  in  the  same  way  as  they  do 
within  a  country.  The  distribution  of  industry  among  the  various 
nations  is  regulated,  not  by  absolute  cost  of  production,  but  by 
relative  cost  of  production.  The  credit  of  having  shown  this  belongs 
to  Ricardo. 

Smith's  demonstration  of  the  inconveniences  of  Protection  is 
incomplete,  and  we  feel  the  incompleteness  all  the  more  when  he 
attempts  to  prove  the  advantages  of  international  trade. 

The  real  and  decisive  argument  in  favour  of  free  exchange  turns 
upon  a  consideration  of  the  consumer's  interests.  Increased 
utilities  placed  at  his  disposal  mark  the  superiority  of  free  exchange, 

1  Wealth  of  Nations,  Book  IV,  chap.  2 ;  Cannan,  vol.  i,  p.  419. 

8  Ibid.,  Book  IV,  chap.  1;  vol.  i,  p.  422. 

'  Ibid.,  Book  IV,  chap.  3,  part  ii ;  vol.  i,  pp.  457-458. 


100  ADAM  SMITH 

or  as  John  Stuart  Mill  puts  it,  "  the  only  direct  advantage  of  foreign 
commerce  consists  in  the  imports."  l  With  Smith  this  is  the  point 
of  view  developed  least  of  all.  True,  he  wrote  that  "  consump- 
tion is  the  sole  end  and  purpose  of  all  production.  But,  in  the 
mercantile  system,  the  interest  of  the  consumer  is  almost  constantly 
sacrificed  to  that  of  the  producer."  *  This  criticism,  however,  was 
placed  at  the  end  of  his  examination  of  the  Mercantilist  system  in 
chap.  8  of  Book  IV.  It  is  not  found  in  the  first  edition  of  the 
work,  and  was  only  added  in  the  third.3 

It  is  the  point  of  view  of  the  producer  that  Smith  invariably  adopts 
when  attempting  to  illustrate  the  advantages  of  international  trade.4 

Just  now  foreign  trade  seemed  to  afford  a  means  of  disposing  of 
a  country's  surplus  products,  and  this  extension  of  the  market,  it 
was  argued,  would  lead  to  further  division  of  labour  and  increased 
productivity.6  But  one  is  led  to  ask  why,  instead  of  producing  the 
superfluous  goods  which  it  must  export,  it  does  not  produce  those 
things  which  it  is  obliged  to  import. 

Smith,  being  now  desirous  of  showing  that  international  trade 
necessarily  benefits  both  countries,  bases  his  argument  upon  the 
fact  that  the  merchants  in  both  countries  must  make  a  profit — i.e.  get 
an  additional  exchange  value,  which  must  be  added  to  the  others. 
To  this  Ricardo  justly  replied  that  the  profits  of  a  merchant  do  not 
necessarily  increase  the  sum  of  utilities  possessed  by  any  country. 

Here  again,  in  striking  contrast  with  the  attitude  of  the  Physio- 
crats, Smith,  despite  himself,  has  championed  his  own  adversaries. 
As  yet  he  is  not  sufficiently  rid  of  Mercantilist  prejudice  not  to  be 
concerned  with  the  welfare  of  the  producer,  and  in  his  great  work 
we  find  excellent  argument  and  debatable  points  of  view  placed  side 
by  side.  It  does  not  appear  that  he  himself  realised  this  incom- 
patibility. An  irresistible  tide  was  sweeping  everybody  before  it 
in  the  direction  of  a  more  liberal  policy.  It  proved  too  powerful  for 

1  Principles  of  Political  Economy,  Book  III,  chap.  17. 

!  Wealth  of  Nations,  Book  IV,  chap.  8  ;  Carman,  vol.  ii,  p.  159. 

•  It  is  true  that  in  Book  IV,  chap.  3,  part  2,  he  declares  :  "  In  every  country  it 
always  is  and  must  be  the  interest  of  the  great  body  of  the  people  to  buy  whatever 
they  want  of  those  who  sell  it  cheapest.     The  proposition  is  so  very  manifest, 
that  it  seems  ridiculous  to  take  any  pains  to  prove  it."     (Cannan,  vol.  i,  p.  458.) 

4  Speaking  of  duties  on  corn,  he  writes :  "  To  prohibit  by  a  perpetual  law 
the  importation  of  foreign  corn  and  cattle,  is  in  reality  to  enact,  that  the  popula- 
tion and  industry  of  the  country  shall  at  no  time  exceed  what  the  true  produce 
of  its  own  soil  can  maintain."  (Ibid.,  Book  IV,  chap.  2  ;  vol.  i,  p.  427.)  He 
always  views  the  question  from  the  standpoint  of  increased  population  and 
labour,  and  not  from  that  of  the  consumer. 

•  Ibid.,  Book  II,  chap.  5.     Cf.  Book  IV,  chap.  1. 


ECONOMIC  LIBERTY  AND  INTERNATIONAL  TRADE  101 

his  contemporaries,  who  were  not  concerned  to  give  a  careful 
consideration  to  every  part  of  his  thesis.  Enough  that  they  found 
in  him  an  ardent  champion  of  an  attractive  cause. 

We  have  already  noticed  more  than  once  the  hesitation  which 
Smith  displays  when  he  comes  to  apply  his  principle,  and  we  must 
again  refer  to  it  in  this  connection. 

Theoretically  a  champion  of  absolutely  free  exchange,  he  miti- 
gates his  belief  in  practice,  and  mentions  an  exception  to  his  policy 
which  seemed  to  him  a  mere  matter  of  common  sense.  **  To  expect, 
indeed,  that  the  freedom  of  trade  should  ever  be  entirely  restored  in 
Great  Britain,  is  as  absurd  as  to  expect  that  an  Oceana  or  Utopia 
should  ever  be  established  in  it.  Not  only  the  prejudices  of  the 
public,  but  what  is  more  unconquerable,  the  private  interests  of 
many  individuals,  irresistibly  oppose  it."  J  Facts  have  belied  this 
prophecy,  like  many  others.  England  of  the  nineteenth  century 
succeeded  in  realising  this  Utopia  of  free  exchange — almost  to 
perfection. 

Without  any  illusion  as  to  the  future,  his  condemnation  of  the 
past  was  not  altogether  unqualified.  He  justified  some  of  the. acts 
that  were  inspired  by  Mercantilism.  "  The  act  of  navigation  2  is 
not  favourable  to  foreign  commerce,"  said  he ;  "  as  defence, 
however,  is  of  much  more  importance  than  opulence,  the  act  of 
navigation  is,  perhaps,  the  wisest  of  all  the  commercial  regulations 
of  England."8  In  another  instance  he  justifies  an  import  duty 
where  a  tax  is  levied  upon  goods  similar  to  those  imported.  Here 
an  import  duty  merely  restores  that  normal  state  of  competition 
which  was  upset  by  the  imposition  of  the  Excise.  Retaliation  as 
a  means  of  securing  the  abolition  of  foreign  duties  is  not  altogether 
under  his  ban.4  And  he  finally  admits  that  liberty  is  best  introduced 
gradually  into  those  countries  in  which  industry  has  long  enjoyed 
Protection  or  where  a  great  number  of  men  are  employed.5 

1  Wealth  of  Nations,  Book  IV,  chap.  2,  in  fine ;  Carman,  vol.  i,  p.  435. 

*  The  "  Navigation  Laws  "  is  a  generic  term  for  a  number  of  laws,  the  most 
famous  of  them  dating  from  the  time  of  Cromwell.     Their  immediate  object 
was  the  destruction  of  the  Dutch  fleet,  and  English  commerce  was  organised 
with  a  view  to  securing  this.     There  is  no  doubt  but  that  they  contributed  very 
considerably  to  the  development  of  English  maritime  power. 

1  Ibid.,  Book  IV,  chap.  2  ;   vol.  i,  p.  429. 

*  But  "  when  there  is  no  probability  that  any  euch  repeal  can  be  procured 
it  seems  a  bad  method  of  compensating  the  injury  done  to  certain  classes  of  our 
people,  to  do  another  injury  ourselves,  not  only  to  those  classes,  but  to  almost 
all  the  other  classes  of  them."     (Ibid.,  Book  IV,  chap.  2  ;  vol.  i,  p.  433.) 

1  The  discussion  of  these  various  cases  is  to  be  found  towards  the  end  of 
chap.  2  of  Book  IV. 


102  ADAM  SMITH 

His  practical  conclusion  is  somewhat  as  follows  :  Instead  of 
innumerable  taxes  which  hinder  importation  and  hamper  production, 
England  ought  to  content  herself  with  the  establishment  of  a  certain 
number  of  taxes  of  a  purely  fiscal  character,  placed  upon  com- 
modities such  as  wine,  alcohol,  sugar,  tobacco,  cocoa.  Such  a 
system,  though  perfectly  consonant  with  a  great  deal  of  free  exchange, 
would  yield  abundant  revenue  to  the  Treasury,  and  would  afford 
ample  compensation  for  the  losses  resulting  from  the  introduction  of 
Free  Trade.1 

England  has  followed  his  advice,  and  her  financial  system  is 
to-day  founded  on  these  bases.  Few  economists  can  boast  of  such 
a  complete  realisation  of  their  projects. 


IV:    THE  INFLUENCE  OF  SMITH'S  THOUGHT 
AND  ITS  DIFFUSION.    J.  B.  SAY 

THE  eighteenth  century  was  essentially  a  century  of  levelling  down. 
In  Smith's  conception  of  the  economic  world  we  have  an  excellent 
example  of  this.  Its  chief  charm  lies  in  the  simplicity  of  its  outlines, 
and  this  doubtless  accounted  for  his  influence  among  his  contem- 
poraries. The  system  of  natural  liberty  towards  which  both  their 
political  and  philosophical  aspirations  seemed  to  point  were  here 
deduced  from,  and  supported  by,  evidence  taken  direct  from  a  study 
of  human  nature — evidence,  moreover,  that  seemed  to  tally  so  well 
with  known  facts  that  doubt  was  out  of  the  question.  Smith's  work 
still  retains  its  irresistible  charm.  Even  if  his  ideas  are  some  day 
shown  to  be  untenable — a  contingency  we  cannot  well  imagine — his 
book  will  remain  as  a  permanent  monument  of  one  of  the  most 
important  epochs  in  economic  thought.  It  must  still  be  considered 
the  most  successful  attempt  made  at  embracing  within  a  single 
purview  the  infinite  diversity  of  the  economic  world. 

But  its  simplicity  also  constituted  its  weakness.  To  attain  this 
simplicity  more  than  one  important  fact  that  refused  to  fit  in  with 
the  system  had  to  remain  in  the  background.  The  evidence  employed 
was  also  frequently  incomplete.  None  of  the  special  themes — price, 
wages,  profits,  and  rent,  the  theory  of  international  trade  or  of 
capital — which  occupy  the  greater  portion  of  the  work,  but  has 
been  in  some  way  corrected,  disputed,  or  replaced.  But  the  structure 
loses  stability  if  some  of  the  corner-stones  are  removed.  And  new 
points  of  view  have  appeared  of  which  Smith  did  not  take  sufficient 
account.  Instead  of  the  pleasant  impression  of  simplicity  and 
1  This  system  is  expounded  in  Book  V,  chap  2,  part  ii,  art.  5. 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    103 

security  which  a  perusal  of  Smith's  work  gave  to  the  economists  of 
the  early  nineteenth  century,  there  has  been  gradually  substituted 
by  his  successors  a  conviction  of  the  growing  complexity  of 
economic  phenomena. 

To  pass  a  criticism  on  the  labours  of  Adam  Smith  would  be  to 
review  the  economic  doctrines  of  the  nineteenth  century.  That  is 
the  best  eulogy  one  can  bestow  upon  his  work.  The  economic  ideas 
of  a  whole  century  were,  so  to  speak,  in  solution  in  his  writings. 
Friends  and  foes  have  alike  taken  him  as  their  starting-point.  The 
former  have  developed,  extended,  and  corrected  his  work.  The  latter 
have  subjected  his  principal  theories  to  harsh  criticism  at  every  point. 
All  with  tacit  accord  admit  that  political  economy  commenced 
with  him.  As  Gamier,  his  French  translator,  put  it,  "  he  wrought 
a  complete  revolution  in  the  science."  J  To-day,  even  although  the 
Wealth  of  Nations  may  no  longer  appear  to  us  as  a  truly  scientific 
treatise  on  political  economy,  certain  of  its  fundamental  ideas  remain 
incontestable.  The  theory  of  money,  the  importance  of  division  of 
labour,  the  fundamental  character  of  spontaneous  economic  institu- 
tions, the  constant  operation  of  personal  interest  in  economic  life, 
liberty  as  the  basis  of  rational  political  economy — all  these  appear 
to  us  as  definite  acquisitions  to  the  science. 

The  imperfections  of  the  work  will  be  naturally  demonstrated 
in  the  chapters  which  follow.  In  order  to  complete  our  exposi- 
tion of  Smith's  doctrines  it  only  remains  to  show  how  they  were 
diffused. 

The  rapid  spread  of  his  ideas  throughout  Europe  and  their 
incontestable  supremacy  remains  one  of  the  most  curious  phenomena 
in  the  history  of  ideas.  Smith  persuaded  his  own  generation  and 
governed  the  next.  2  History  affords  us  some  clue.  To  attribute 
it  solely  to  the  influence  of  his  book  is  sheer  exaggeration.  A  great 
deal  must  be  set  to  the  credit  of  circumstances  more  or  less  fortuitous. 

M.  Mantoux  remarks  with  much  justice  that  "  it  was  the  American 
War  rather  than  Smith's  writings  which  demonstrated  the  decay  of 
the  ancient  political  economy  and  compassed  its  ruin.  The  War 
of  Independence  proved  two  things  :  (1)  The  danger  lurking  in 
a  colonial  system  which  could  goad  the  most  prosperous  colonies 
to  revolt ;  (2)  the  uselessness  of  a  protective  tariff,  for  on  the  very 
morrow  of  the  war  English  trade  with  the  American  colonies  was 
more  flourishing  than  ever  before.  "  The  loss  of  the  American 
colonies  to  England  was  really  a  gain  to  her."  So  wrote  Say  in 

1  In  the  preface  to  his  translation,  1821  ed.,  p.  Ixix. 

1  llae,  Life  of  Smith,  p.  103.     The  author  of  this  famous  phrase  is  not  known. 


104  ADAM  SMITH 

1803,  and  he  adds :  "  This  is  a  fact  that  I  have  nowhere  seen  dis 
puted."  x  To  the  American  War  other  causes  must  be  added  : 
(1)  The  urgent  need  for  markets  felt  by  English  merchants  at  the 
close  of  the  Napoleonic  wars ;  they  were  already  abundantly 
supplied  with  excellent  machinery.  (2)  Coupled  with  this  was  a 
growing  belief  that  a  high  price  of  corn  as  the  result  of  agricultural 
protection  increased  the  cost  of  hand  labour.  These  two  reasons 
were  enough  to  create  a  desire  for  a  general  lowering  of  the  customs 
duties. 

Subsequent  events  have  justified  Smith's  attitude  on  the  question 
of  foreign  trade.  In  the  matter  of  domestic  trade  he  has  been  less 
fortunate. 

The  French  Revolution,  which  owed  its  economic  measures  to 
the  Physiocrats,  gave  a  powerful  impulse  to  the  principle  of  liberty. 
The  influence  of  the  movement  was  patent  enough  on  the  Continent. 
Even  in  England,  where  this  influence  was  least  felt;  everybody  was 
in  favour  of  laissez-faire.  Pitt  became  anxious  to  free  Ireland  from 
its  antiquated  system  of  prohibitions,  and  he  succeeded  in  doing 
this  by  his  Act  of  Union  of  1800.  The  regulations  laid  down  by  the 
Elizabethan  Statute  of  Apprentices,  with  its  limitation  of  the  hours 
of  work  and  the  fixing  of  wages  by  justices  of  the  peace,  became  more 
and  more  irksome  as  industry  developed.  Every  historian  of  the 
Industrial  Revolution  has  described  the  struggle  between  workers 
and  masters  and  shown  how  the  former  clung  in  despair  to  the  old 
legislative  measures  as  their  only  safeguard  against  a  too  rapid 
change,  while  the  latter  refused  to  be  constrained  either  in  the 
choice  of  workmen  or  the  methods  of  their  work.2  They  wished  to 
pay  only  the  wages  that  suited  them  and  to  use  their  machines  as 
long  as  possible.  These  repeated  attacks  rendered  the  old  Statute 
of  Apprentices  useless,  and  Parliament  abolished  its  regulations  one 
after  another,  so  that  by  1814  all  traces  of  it  were  for  ever  effaced 
from  the  Statute  Book. 

But  Smith  did  not  foresee  these  things.  He  did  not  write  with 
a  view  to  pleasing  either  merchants  or  manufacturers.  On  the 
contrary,  he  was  never  weary  of  denouncing  their  monopolistic 
tendencies.  But  by  the  force  of  circumstances  manufacturers 
and  merchants  became  his  best  allies.  His  book  supplied  them 
with  arguments,  and  it  was  his  authority  that  they  always 
invoked. 

>  J.  B.  Say,  Traite,  1st  ed.,  p.  240. 

1  Mantoux,  La  Revolution  industriette,  p.  83.  M.  Halevy  gives  expression 
to  a  similar  idea  in  his  La  Jeunesse  de  Bsnlham,  p.  193  (Paris,  1901). 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    105 

His  authority  never  ceased  growing.  As  soon  as  the  Wealth  of 
Nations  appeared,  men  like  Hume,  and  Gibbon,  the  historian, 
expressed  to  Smith  or  to  his  friends  their  admiration  of  the  new 
work.  In  the  following  year  the  Prime  Minister,  Lord  North, 
borrowed  from  him  the  idea  of  levying  two  new  taxes — the  tax  on 
malt  and  the  tax  on  inhabited  houses.  Smith  was  yet  to  make 
an  even  more  illustrious  convert  in  the  person  of  Pitt.  Pitt  was  a 
student  when  the  Wealth  of  Nations  appeared,  but  he  always  declared 
himself  a  disciple  of  Smith,  and  as  soon  as  he  became  a  Minister  he 
strove  to  realise  his  ideas.  It  was  he  who  signed  the  first  Free 
Trade  treaty  with  France— the  Treaty  of  Eden,  1786.1  When 
Smith  came  to  London  in  1787,  Pitt  met  him  more  than  once 
and  consulted  him  on  financial  matters.  The  story  is  told  that 
after  one  of  these  conversations  Smith  exclaimed :  "  What  an 
extraordinary  person  Pitt  is  1  He  understands  my  ideas  better  than 
myself." 

While  Smith  made  converts  of  the  most  prominent  men  of  his 
time,  his  book  gradually  reached  the  public.  Four  editions  in 
addition  to  the  first  appeared  during  the  author's  lifetime.2  The 
third,  in  1784,  presents  important  differences  in  the  way  of  additions 
and  corrections  as  compared  with  the  first.  From  the  date  of  his 
death  in  1790  to  the  end  of  the  century  three  other  editions  were 
published.3 

Similar  success  attended  the  appearance  of  the  work  on  the  Conti- 
nent. In  France  he  was  already  known  through  his  Theory  of  Moral 
Sentiments.  The  first  mention  of  the  Wealth  of  Nations  in  France 
appears  in  the  Journal  des  Savants  in  the  month  of  February,  1777. 
Here,  after  a  brief  description  of  the  merits  of  the  work,  the  critic 
gives  expression  to  the  following  curious  opinion :  **  Some  of  our 
men  of  letters  who  have  read  it  have  come  to  the  conclusion  that  it 
is  not  a  book  that  can  be  translated  into  our  language.  They  point 
out,  among  other  reasons,  that  no  one  would  be  willing  to  bear  the 
expense  of  publishing  because  of  the  uncertain  return,  and  a  book- 
seller least  of  all.  They  are  bound  to  admit,  however,  that  the  work 
is  full  of  suggestions  and  of  advice  that  is  useful  as  well  as  curious, 
and  might  prove  of  benefit  to  statesmen."  In  reality,  despite  the 
opinion  of  those  men  of  letters,  several  translations  of  the  work 
did  appear  in  France,  as  well  as  elsewhere  in  Europe.  In  little  more 
than  twenty  years,  between  1779  and  1802,  four  translations  had 

1  So  called  in  honour  of  the  leading  English  representative.  Lord  Eden. 
1  In  1778,  1784,  1786,  1789. 
*  1781,  1793,  1790. 


106  ADAM  SMITH 

appeared.     This  in  itself  affords  sufficient  proof  of  the  interest  which 
the  book  had  aroused.1 

Few  works  have  enjoyed  such  complete  and  universal  success. 
But  despite  admiration  the  ideas  did  not  spread  very  rapidly. 
Faults  of  composition  have  been  burdened  with  the  responsibility 
for  this,  and  it  is  a  reproach  that  has  clung  to  the  Wealth  of  Nations 
from  the  first.  Its  organic  unity  is  very  pronounced,  but  Smith 
does  not  seem  to  have  taken  the  trouble  to  give  it  even  the  semblance 
of  outward  unity.  To  discover  its  unity  requires  a  real  effort  of 
thought.  Smith  whimsically  regarded  it  as  a  mere  discourse,  and 
the  reading  occasionally  gives  the  impression  of  conversation.  The 
general  formulae  which  summarise  or  recapitulate  his  ideas  are 
indifferently  found  either  in  the  middle  or  at  the  end  of  a  chapter, 
just  as  they  arose.  They  represent  the  conclusions  from  what 
preceded  as  they  flashed  across  his  mind.  On  the  other  hand,  a 
consideration  of  such  a  question  as  money  is  scattered  throughout 
the  whole  work,  being  discussed  on  no  less  than  ten  different  occa- 
sions. As  early  as  April  1,  1776,  Hume  had  expressed  to  Smith 
some  doubts  as  to  the  popularity  of  the  book,  seeing  that  its  reading 
demanded  considerable  attention.  Sartorius  in  1794  attributed  to 
this  difficulty  the  slow  progress  made  by  Smith's  ideas  in  Germany. 
Germain  Gamier,  the  French  translator,  gave  an  outline  of  the 
book  in  order  to  assist  his  readers.  It  was  generally  agreed  that 
the  work  was  a  striking  one,  but  badly  composed  and  difficult  to 
penetrate  owing  to  the  confused  and  equivocal  character  of  some 
of  the  paragraphs.  When  Say  referred  to  it  as  "  a  chaotic  collection 
of  just  ideas  thrown  indiscriminately  among  a  number  of  positive 
truths,"  2  he  expressed  the  opinion  of  all  who  had  read  it. 

But  a  complete  triumph,  so  far  as  the  Continent  at  least  was 
concerned,  had  to  be  the  work  of  an  interpreter.  Such  an  inter- 
preter must  fuse  all  these  ideas  into  a  coherent  body  of  doctrines, 
leaving  useless  digressions  aside.3  This  was  the  task  that  fell  into  the 

1  Professor  Kraus,  writing  in  1796,  declared  that  no  book  published  since  the 
days  of  the  New  Testament  would  effect  so  many  welcome  changes  when  it 
became  thoroughly  known  (J.  Rae,  p.  360).  By  the  beginning  of  the  nineteenth 
century  its  influence  had  become  predominant.  All  the  Prussian  statesmen 
who  aided  Stein  in  the  preparation  and  execution  of  those  important  reforms 
that  gave  birth  to  modern  Prussia  were  thoroughly  versed  in  Smith's  doctrines, 
and  the  Prussian  tariff  of  1821  is  the  first  European  tariff  in  which  they 
are  deliberately  applied.  (Cf.  Roscher,  GeschicJite  der  Nationaldkonomik  in 
Deittschland.) 

1  In  his  introduction  to  the  Traitl,  1st  ed.  (The  phrase  was  deleted  in  the 
6th  ed.) 

»  J.  B.  Say,  Traite,  1st  ed.,  introduction,  p.  xxxiii 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    107 

hands  of  J.  B.  Say.  Among  his  merits  (and  it  is  not  the  only  one)  is 
that  of  popularising  the  ideas  of  the  great  Scotch  economist  on  the 
Continent,  and  of  giving  to  the  ideas  a  somewhat  classical  appearance. 
The  task  of  discrediting  the  first  French  school  of  economists  and  of 
facilitating  the  expansion  of  English  political  economy  fell,  curiously 
enough,  to  the  hands  of  a  Frenchman. 

J.  B.  Say  was  twenty-three  years  of  age  in  1789.1  At  that  time 
he  was  Clavieres'  secretary.  Clavieres  became  Minister  of  Finance 
in  1792,  but  at  this  period  he  was  manager  of  an  assurance  company, 
and  was  already  a  disciple  of  Smith.  Say  came  across  some  stray 
pages  of  the  Wealth  of  Nations,  and  sent  for  a  copy  of  the  book.2 
The  impression  it  made  upon  him  was  profound.  "  When  we  read  this 
work,"  he  writes,  "  we  feel  that  previous  to  Smith  there  was  no 
such  thing  as  political  economy."  Fourteen  years  afterwards,  in 
1803,  appeared  Le  Traiii  d 'Economic  politique.  The  book  met  with 
immediate  success,  and  a  second  edition  would  have  appeared  had 
not  the  First  Consul  interdicted  it.  Say  had  refused  to  support  the 
Consul's  financial  recommendations,  and  the  writer,  in  addition  to 
having  his  book  proscribed,  found  himself  banished  from  the  Tribunate. 
Say  waited  until  1814  before  republishing  it.  New  editions  rapidly 
followed,  in  1817,  1819,  and  1826.  The  treatise  was  translated  into 
several  languages.  Say's  authority  gradually  extended  itself;  his 
reputation  became  European;  and  by  these  means  the  ideas  of 
Adam  Smith,  clarified  and  logically  arranged  in  the  form  of  general 
principles  from  which  conclusions  could  be  easily  deduced,  gradually 
captivated  the  more  enlightened  section  of  public  opinion. 

*  He  was  born  at  Lyons  on  January  5,  1767.  After  a  visit  to  England 
he  entered  the  employment  of  an  assurance  company,  and  took  part  as  a 
volunteer  in  the  campaign  of  1792.  From  1794  to  1800  he  edited  a  review 
entitled  Dccad,e  philosophique,  litteraire  et  'politique,  par  une  Societe  de  Republicains. 
He  was  nominated  a  member  of  the  Tribunate  in  1799.  After  the  publication 
of  his  Traitt,  the  First  Consul,  having  failed  to  obtain  a  promise  that  the  financial 
proposals  outlined  in  the  first  edition  would  be  eliminated  in  the  second,  dis- 
missed him  from  the  Tribunate,  offering  him  the  post  of  director  of  the  Droits 
reunis  as  compensation.  Say,  who  disapproved  of  the  new  rigime,  refused, 
and  set  up  a  cotton  factory  at  Auchy-les-Hesdins,  in  the  Pas-de-Calais.  He 
realised  his  capital  in  1813,  returned  to  Paris,  and  in  1814  published  a  second 
edition  of  his  treatise.  In  1816  he  delivered  a  course  of  lectures  on  political 
economy  at  the  Athenee,  probably  the  first  course  given  in  France.  These  lec- 
tures were  published  in  1817  in  his  Catichisme  d'lSconomie  politique.  In  1819 
the  restoration  Government  appointed  him  to  give  a  course  on  "  Industrial 
Economy  "  (the  term  "  Political  Economy  "  was  too  terrible).  In  1831  he  was 
made  Professor  of  Political  Economy  in  the  College  de  France.  He  died  in  1832. 
His  Cours  complet  d'6conomie  'politique,  was  published,  in  six  volumes,  in  1828-29. 

1  Cf.  a  letter  to  Louis  Say  in  1827  ((Euvres  diverge*,  p.  545). 


108  ADAM  SMITH 

It  would,  however,  be  unjust  to  regard  Say  as  a  mere  popu- 
lariser  of  Smith's  ideas.  With  praiseworthy  modesty,  he  has  never 
attempted  to  conceal  all  that  he  owed  to  the  master.  The  master's 
name  is  mentioned  in  almost  every  line,  but  he  never  remains 
content  with  a  mere  repetition  of  his  ideas.  These  are  carefully 
reconsidered  and  reviewed  with  discrimination.  He  develops  some 
of  them  and  emphasises  others.  Amid  the  devious  paths  pursued 
by  Smith,  the  French  economist  chooses  that  which  most  directly 
leads  to  the  desired  end.  This  path  is  so  clearly  outlined  for  his 
successors  that  "  wayfaring  men,  though  fools,  could  not  err  therein." 
In  a  sense  he  may  be  said  to  have  filtered  the  ideas  of  the  master,  or 
to  have  toned  his  doctrines  with  the  proper  tints.  He  thus  imparted 
to  French  political  economy  its  distinctive  character  as  distinguished 
from  English  political  economy,  to  which  at  about  the  same  time 
Malthus  and  Ricardo  were  to  give  an  entirely  new  orientation. 
What  interests  us  more  than  his  borrowing  is  the  personal  share 
which  he  has  in  the  work,  an  estimate  of  which  we  must  now 
attempt. 

(1)  In  the  first  place,  Say  succeeded  in  overthrowing  the  work  of 
the  Physiocrats. 

The  work  of  demolition  was  not  altogether  useless.  In  France 
there  were  many  who  still  clung  to  the  "  sect."  Even  Germain 
Gamier,  Smith's  translator,  considered  the  arguments  of  the  Physio- 
crats theoretically  irrefutable.  The  superiority  of  the  Scotch  eco- 
nomist was  entirely  in  the  realm  of  practice.1  "  We  may,"  says 
he,  "  reject  the  Economistes'  theory  [meaning  the  Physiocrats'] 
because  it  is  less  useful,  although  it  is  not  altogether  erroneous." 
Smith  himself,  as  we  know,  was  never  quite  rid  of  this  idea,  for  he 
recognised  a  special  productiveness  of  land  as  a  result  of  the  co- 
operation of  nature,  and  doctors,  judges,  advocates,  and  artists  were 
regarded  as  unproductive.  But  Say's  admission  was  the  last  straw. 
Not  in  agriculture  alone,  but  everywhere,  "  nature  is  forced  to  work 
along  with  man,"  2  and  by  the  funds  of  nature  was  to  be  understood 
in  future  all  the  help  that  a  nation  draws  directly  from  nature,  be 
it  the  force  of  wind  or  rush  of  water.3  As  to  the  doctors,  lawyers, 
etc.,  how  are  we  to  prove  that  they  take  no  part  in  production  ? 
Gamier  had  already  protested  against  their  exclusion.  Such  servicsa 
must  no  doubt  be  classed  as  immaterial  products,  but  products  none 

1  Garnier's  translation  of  Adam  Smith,  1802,  vol.  v,  p.  283. 

•  TtaM,  1803  ed.,  p.  30. 

•  Ibid.,  p.  21.     Later  on  he  employs  the  more  comprehensive  term  "natural 
agents." 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    109 

the  less,  seeing  that  they  possess  exchange  value  and  are  the  out- 
come *  of  the  co-operation  of  capital  and  industry.  In  other  respects 
also — e.g.,  in  the  pleasure  and  utility  which  they  yield — services 
are  not  very  unlike  commodities.  Say's  doctrine  meets  with  some 
opposition  on  this  point,  for  the  English  economists  were  unwilling 
to  consider  a  simple  service  as  wealth  because  of  its  unendurable 
character,  and  the  consequent  fact  that  it  could  not  be  considered 
as  adding  to  the  aggregate  amount  of  capital.  But  he  soon  wins 
over  the  majority  of  writers.2  Finally  Say,  like  Condillac,  discovered 
a  decisive  argument  against  Physiocracy  in  the  fact  that  the  produc- 
tion of  material  objects  does  not  imply  their  creation.  Man  never 
can  create,  but  must  be  content  with  mere  transformation  of  matter. 
Production  is  merely  a  creation  of  utilities,  a  furthering  of  that 
capacity  of  responding  to  our  needs  and  of  satisfying  our  wants 
which  is  possessed  by  commodities  ;  and  all  work  is  productive  which 
achieves  this  result,  whether  it  be  industry,  commerce,  or  agri- 
culture.3 The  Physiocratic  distinction  falls  to  the  ground,  and  Say 
refutes  what  Smith,  owing  to  his  intimacy  with  his  adversaries, 
had  failed  to  disprove. 

(2)  On  another  point  Say  carries  forward  Smith's  ideas,  although 
at  the  same  time  superseding  them.  He  subjects  the  whole  con- 
ception of  political  economy  and  the  role  of  the  economist  to  a  most 
thorough  examination. 

We  have  already  noticed  that  the  conception  of  the  "  natural 
order  "  underwent  considerable  modification  during  the  period  which 
intervened  between  the  writings  of  the  Physiocrats  and  the  appear- 
ance of  the  Wealth  of  Nations.  The  Physiocrats  regarded  the  "  order" 
as  one  that  was  to  be  realised,  and  the  science  of  political  economy 
as  essentially  normative.  For  Smith  it  was  a  self-realising  order. 
This  spontaneity  of  the  economic  world  is  analogous  to  the  vitality 
of  the  human  body,  and  is  capable  of  triumphing  over  the  artificial 
barriers  which  Governments  may  erect  against  its  progress.  Practical 

1  Traitt,  1803  ed.,  Book  I,  chaps.  42  and  43.  By  "  industry  "  Say  understands 
every  kind  of  labour.  Cf.  6th  ed.,  pp.  70  et  aeq. 

*  Malthus  still  appeared  hostile  to  the  doctrine  of  immaterial  products,  but 
Lauderdale,  Tooke,  McCulloch,  and  Senior  accepted  it,  and  it  seemed  definitely 
fixed  when  Stuart  Mill  confined  the  word  "  product "  to  material  products  only. 
For  Tooke's  view  see  his  letter  to  J.  B.  Say  in  the  (Evvres  diverses  of  the  latter. 

*  Traite,  Book  I,  chap.  2.     Is  it  not  strange  that  Say  should  have  failed  to 
apply  this  idea  to  commerce  ?     He  regards  the  latter  as  productive  because  it 
creates  exchangeable  values.     Nevertheless  he  criticises  Condillac  for  having 
said  that  mere  exchange  of  goods  increases  wealth  because  it  increases  the 
utility  of  objects.     This  is  because  Say  is  perpetually  mixing  up  utility  and 
exchange  value,  a  confusion  that  leads  him  into  many  serious  mistakes. 


110  ADAM  SMITH 

political  economy  is  based  upon  a  knowledge  of  the  economic  consti- 
tution of  society,  and  its  sole  aim  is  to  give  advice  to  statesmen. 
According  to  Say,  this  definition  concedes  too  much  to  practice. 
Political  economy,  as  he  thinks,  is  just  the  science  of  this  "  sponta- 
neous economic  constitution,"  or,  as  he  puts  it  in  1814,  it  is  a  study 
of  the  laws  which  govern  wealth.1  It  is,  as  the  title  of  his  book 
suggests,  simply  an  exposition  of  the  production,  distribution,  and 
consumption  of  wealth.  It  must  be  distinguished  from  politics, 
with  which  it  has  been  too  frequently  confused,  and  also  from 
statistics,  which  is  a  simple  description  of  particular  facts  and  not  a 
science  of  co-ordinate  principles  at  all. 

Political  economy  in  Say's  hands  became  a  purely  theoretical 
and  descriptive  science.  The  role  of  the  economist,  like  that  of  the 
savant,  is  not  to  give  advice,  but  simply  to  observe,  to  analyse,  and 
to  describe.  "  He  must  be  content  to  remain  an  impartial  spectator," 
he  writes  to  Malthus  in  1820.  "  What  we  owe  to  the  public  is  to 
tell  them  how  and  why  such  and  such  a  fact  is  the  consequence  of 
another.  Whether  the  conclusion  be  welcomed  or  rejected,  it  is 
enough  that  the  economist  should  have  demonstrated  its  cause ;  but 
he  must  give  no  advice."  * 

In  this  way  Say  broke  with  the  long  tradition  which,  stretching 
from  the  days  of  the  Canonists  and  the  Cameralists  to  those  of  the 
Mercantilists  and  the  Physiocrats,  had  treated  political  economy  as 
a  practical  art  and  a  guide  for  statesmen  and  administrators.  Smith 
had  already  tried  to  approach  economic  phenomena  as  a  scientist,  but 
there  was  always  something  of  the  reformer  in  his  attitude.  Say's 
only  desire  was  to  be  a  mere  student ;  the  healing  art  had  no  attrac- 
tion for  him,  and  so  he  inaugurates  the  true  scientific  method.  He, 
moreover,  instituted  a  comparison  between  this  science  and  physics 
rather  than  between  it  and  natural  history,  and  in  this  respect  also 
he  differed  from  Smith,  for  whom  the  social  body  was  essentially  a 
living  thing.  Without  actually  employing  the  term  "  social  physics," 
he  continually  suggests  it  by  his  repeated  comparison  with  Newtonian 
physics.  The  principles  of  the  science,  like  the  laws  of  physics,  are 
not  the  work  of  men.  They  are  derived  from  the  very  nature  of 
things.  They  are  not  established ;  they  are  discovered.  They 
govern  even  legislators  and  princes,  and  one  never  violates  them  with 

1  Traiti,  6th  ed.,  p.  6.  The  word  "  laws  "  does  not  appear  in  the  first  edition. 
Say  merely  speaks  of  general  principles.  It  is  found  for  the  first  time  in  the 
edition  of  1814  :  "  General  facts  or,  if  one  wishes  to  call  principles  by  that  name, 
general  laws  "  (p.  xxix). 

1  Correspondence  with  Malthus,  in  (Euvres  diverges,  p.  466. 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION     111 

impunity.1  Like  the  laws  of  gravity,  they  are  not  confined  within 
the  frontiers  of  any  one  country,  and  the  limits  of  State  administra- 
tion, which  are  all-important  for  the  student  of  politics,  are  mere 
accidents  for  the  economist.2  Political  economy  is  accordingly 
based  on  the  model  of  an  exact  science,  with  laws  that  are  universal. 
Like  physics,  it  is  not  so  much  concerned  with  the  accumulation  of 
particular  facts  as  with  the  formulation  of  a  few  general  principles 
from  which  a  chain  of  consequences  of  greater  or  smaller  length  may 
be  drawn  according  to  circumstances. 

A  delight  in  uniformity,3  love  of  universality,  and  contempt  for 
isolated  facts,  these  are  the  marks  of  the  savant.  But  the  same 
qualities  in  men  of  less  breadth  of  view  may  easily  become  deformed 
and  result  in  faults  of  indifference  or  of  dogmatism,  or  even  con- 
tempt for  all  facts.  And  are  these  very  faults  not  produced  by 
the  stress  which  he  lays  upon  these  principles  ?  Was  not  political 
economy  placed  in  a  vulnerable  position  for  the  attacks  of  Sismondi, 
of  List,  of  the  Historical  school,  and  *of  the  Christian  Socialists 
by  this  very  work  of  Say  ?  In  his  radical  separation  of  politics 
and  economics,  in  avoiding  the  "  practical "  leanings  of  Adam 
Smith,  he  has  succeeded  in  giving  the  science  a  greater  degree  of 
harmony.  But  it  also  acquired  a  certain  frigidity  which  his  less 
gifted  successors  have  mistaken  for  banality  or  crudity.  Rightly 
or  wrongly,  the  responsibility  is  ascribed  to  Say. 

(3)  We  have  just  seen  the  influence  which  the  progress  of  the 
physical  sciences  had  upon  Say's  conception  of  political  economy; 
but  he  was  also  much  influenced  by  the  progress  of  industry.  Between 
1776,  the  date  of  the  appearance  of  the  Wealth  of  Nations,  and  the 
year  1803,  when  Say's  treatise  appeared,  the  Industrial  Revolution 
had  taken  place.  This  is  a  fact  of  considerable  importance  for  the 
history  of  economic  ideas. 

When  Say  visited  England  a  little  before  1789,  he  found  machine 
production  already  in  full  swing  there.  In  France  at  the  same  date 
manufactures  were  only  just  beginning.  They  increased  rapidly 
under  the  Empire,  and  the  progress  after  1815  became  enormous. 

1  TraiU,  Introd.,  1st  ed.,  p.  ix ;  6th  ed.,  p.  13. 

•  Ibid.,  1st  ed.,  Book  I,  p.  404. 

*  There  is  no  need  for  exaggeration,  however,  and  no  need  to  regard  Say  as 
totally  indifferent  to  suffering  and  misery.     He  declares,  e.g.,  that  ''  for  many 
homes  both  in  town  and  country  life  is  one  long  privation,"  and  that  thrift  in 
general  "  implies,  not  the  curtailment  of  useless  commodities,  such  as  expediency 
and  humanity  would  welcome,  but  a  diminution  of  the  real  needs  of  life,  which  is  a 
standing  condemnation  of  the  economic  system  of  many  Governments."    (Traitt, 
lit  ed.,  vol.  i,  pp.  97-98 ;  6th  ed.,  p.  116.) 


112  ADAM  SMITH 

Chaptal  in  his  work  De  I' Industrie  francaise  reckons  that  in  1819 
there  were  220  factories  in  existence,  with  922,200  spindles  consuming 
13  million  kilograms  of  raw  cotton.  This,  however,  only  repre- 
sented a  fifth  of  the  English  production,  which  twenty  years  later 
was  quadrupled.  Other  industries  were  developing  in  a  similar 
way.  Everybody  was  convinced  that  the  future  must  be  along  those 
lines — an  indefinite  future  it  is  true,  but  it  was  to  be  one  of  wealth, 
work,  and  well-being.  The  rising  generation  was  intoxicated  at 
the  prospect.  The  most  eloquent  exposition  of  this  debauchery  will 
be  found  in  Saint-Simonism. 

Say  did  not  escape  the  infection.  While  Smith  gives  agriculture 
the  premier  place,  Say  accords  the  laurels  to  manufactures.  For 
many  years  industrial  problems  had  been  predominant  in  political 
economy,  and  the  first  official  course  of  lectures  given  by  Say  himself 
at  the  Conservatoire  des  Arts  et  Metiers  was  entitled  "  A  Course 
of  Lectures  on  Industrial  Economy." 

In  that  hierarchy  of  activities  which  Smith  had  drawn  up 
according  to  the  varying  degree  of  utility  each  possessed  for  the 
nation,  Smith  had  placed  agriculture  first.  Say  preserved  the  order, 
but  placed  alongside  of  agriculture  "  all  capital  employed  in  utilising 
any  of  the  productive  forces  of  nature.  An  ingenious  machine 
may  produce  more  than  the  equivalent  of  the  interest  on  the  capital 
it  has  cost  to  produce,  and  society  enjoys  the  benefit  in  lower  prices."  l 
This  sentence  is  not  found  in  the  edition  of  1803,  and  appears  only 
in  the  second  edition.  Say  in  the  meantime  had  been  managing 
his  factory  at  Auchy-les-Hesdins,  and  he  had  profited  by  his  expe- 
rience. This  question  of  machinery,  which  was  merely  touched 
on  by  Smith  in  a  short  passage,  finds  a  larger  place  in  every  succes- 
sive edition  of  Say's  work.  The  general  adoption  of  machinery  by 
manufacturers  both  in  England  and  France  frequently  incited  the 
workers  to  riot.  Say  does  not  fail  to  demonstrate  its  advantages. 
At  first  he  admits  that  the  Government  might  mitigate  the  resulting 
evils  by  confining  the  employment  of  machinery  at  the  outset 
to  certain  districts  where  labour  is  scarce  or  is  employed  in  other 
branches  of  production.2  But  by  the  beginning  of  the  fifth  edition 
he  changed  his  advice  and  declared  that  such  intervention  involved 
interference  with  the  inventor's  property,3  admitting  only  that  the 
Government  might  set  up  works  of  public  utility  in  order  to  employ 
those  men  who  are  thrown  out  of  employment  on  account  of  the 
introduction  of  machinery. 

1  Traiti,  6th  ed.,  p.  403.  2  Hid.,  1st  ed.,  vol.  i,  p.  48. 

»  Ibid.,  5th  ed.,  vol.  i,  p.  67. 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    113 

The  influence  of  these  same  circumstances  must  be  accounted 
responsible  for  the  stress  which  is  laid  by  Say  upon  the  rdle  of  an 
individual  whom  Smith  had  not  even  denned,  but  one  who  is  hence- 
forth to  remain  an  important  personage  in  the  economic  world,  namely, 
the  entrepreneur.  At  the  beginning  of  the  nineteenth  century  the 
principal  agent  of  economic  progress  was  the  industrious,  active, 
well-informed  individual,  either  an  ingenious  inventor,  a  progressive 
agriculturist,  or  an  experienced  business  man.  This  type  became 
quite  common  in  every  country  where  mechanical  production  and 
increasing  markets  became  the  rule.  It  is  he  rather  than  the 
capitalist  properly  so  called,  the  landed  proprietor,  or  the  workman, 
who  is  "  almost  always  pasUve,"  who  directs  production  and 
superintends  the  distribution  of  wealth.  "  The  power  of  industrial 
entrepreneurs  exercises  a  most  notable  influence  upon  the  distri- 
bution of  wealth,"  says  Say.  "In  the  same  kind  of  industry  one 
entrepreneur  who  is  judicious,  active,  methodical,  and  willing  makes 
his  fortune,  while  another  who  is  devoid  of  these  qualities  or  who 
meets  with  very  different  circumstances  would  be  ruined."  1  Is  it 
not  the  master  spinner  of  Auchy-les-Hesdins  who  is  speaking  here  ? 
We  are  easily  convinced  of  this  if  we  compare  the  edition  of 
1803  with  that  of  1814,  and  we  can  trace  the  gradual  growth  and 
development  of  this  conception  with  every  successive  edition  of 
the  work. 

Say's  classic  exposition  of  the  mechanism  of  distribution  is  based 
upon  this  very  admirable  conception,  which  is  altogether  superior  to 
that  of  Smith  or  the  Physiocrats.  The  entrepreneur  serves  as  the 
pivot  of  the  whole  system.  The  following  may  be  regarded  as  an 
outline  of  his  treatment. 

Men,  capital,  and  labour  furnish  what  Say  refers  to  as  produc- 
tive services.  These  services,  when  brought  to  market,  are  given  in 
exchange  for  wages,  interest,  or  rent.  It  is  the  entrepreneur,  whether 
merchant,  manufacturer,  or  agriculturist,  who  requires  them,  and 
it  is  he  who  combines  them  with  a  view  to  satisfying  the  demand 
of  consumers.  **  The  entrepreneurs,  accordingly,  are  mere  inter- 
mediaries who  set  up  a  claim  for  those  productive  services  which 
are  necessary  to  satisfy  the  demand  for  certain  products."  Accord- 
ingly there  arises  a  demand  for  productive  services,  and  the  demand 
is  "  one  of  the  factors  determining  the  value  of  those  services." 
"  On  the  other  hand,  the  agents  of  production,  both  men  and  things, 
whether  land,  capital,  or  industrial  employees,  offer  their  services 

1  Critical  examination  of  McCulloch's  treatise  (1826),  in  (Euvres  diverset, 
pp.  274-275. 


114  ADAM  SMITH 

in  greater  or  less  quantities  according  to  various  motives,  and  thus 
constitute  another  factor  which  determines  the  value  of  these 
same  services."  1  In  this  fashion  the  law  of  demand  and  supply 
determines  the  price  of  services,  the  average  rate  of  interest,  and 
rent.  Thanks  to  the  entrepreneur,  the  value  produced  is  again 
distributed  among  these  "  various  productive  services,"  and  the 
various  services  allotted  according  to  need  among  the  industries.; 
This  theory  of  distribution  is  in  complete  accordance  with  the 
theory  of  exchange  and  production. 

Say's  very  simple  scheme  of  distribution  constitutes  a  real  progress. 
In  the  first  place,  it  is  much  more  exact  than  the  Physiocrats',  who 
conceived  of  exchange  as  taking  place  between  classes  only,  and  not 
between  individuals.  It  also  enables  us  to  distinguish  the  remunera- 
tion of  the  capitalist  from  the  earnings  of  the  entrepreneur,  which 
were  confounded  by  Adam  Smith.  The  Scotch  economist  assumed 
that  the  entrepreneur  was  very  frequently  a  capitalist,  and  confused 
the  two  functions,  designating  his  total  remuneration  by  the  single 
word  "  profit,"  without  ever  distinguishing  between  net  interest  of 
capital  and  profit  properly  so  called.  This  regrettable  confusion 
was  followed  by  other  English  authors,  and  remained  in  English 
economic  theory  for  a  long  time.  Finally,  Say's  theory  has  another 
advantage.  It  gave  to  his  French  successors  a  clear  scheme  of 
distribution  which  was  wanting  in  Smith's  work,  just  at  the  time 
when  Ricardo  was  attempting  to  overcome  the  omission  by  outlining 
a  new  theory  of  distribution.  According  to  Ricardo,  rent,  by  its  very 
nature  and  the  laws  which  give  rise  to  it,  is  opposed  to  other  revenues, 
and  the  rate  of  wages  and  of  profits  must  be  regarded  as  direct  oppo- 
sites,  so  that  the  one  can  only  increase  if  the  other  diminishes — an 
attractive  but  erroneous  theory,  and  one  which  led  to  endless  dis- 
cussion among  English  economists,  with  the  result  that  they  aban- 
doned it  altogether.  Say,  by  showing  this  dependence,  which 
becomes  quite  clear  if  we  regard  wages  and  profits  from  the  point 
of  view  of  demand  for  commodities,  and  by  his  demonstration 
that  rent  is  determined  by  the  same  general  causes — viz.  demand 
and  supply — as  determine  the  exchange  value  of  other  productive 
services,  saved  political  economy  in  France  from  a  similar  disaster. 
It  was  he,  also,  who  furnished  Walras  with  the  first  outlines  of  his 
attractive  conception  of  prices  and  economic  equilibrium.  This 
explains  why  he  never  attached  to  the  theory  of  rent  the  supreme 
importance  given  to  it  by  English  economists.  In  this  respect 
he  has  been  followed  by  the  majority  of  French  economists.  On  the 
1  Traiti,  6th  ed.,  p.  349. 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION    115 

other  hand,  and  for  a  similar  reason,  he  never  went  to  the  opposite 
extreme  of  denying  the  existence  of  rent  altogether  by  regarding  it 
merely  as  the  revenue  yielded  by  capital  sunk  in  land.  In  this  way 
he  avoided  the  error  which  Carey  and  Bastiat  attempted  to  defend 
at  a  later  period.1 

(4)  So  far  it  is  Say's  brilliant  power  of  logical  reasoning  that  we 
have  admired.  But  has  he  contributed  anything  which  is  entirely 
new  to  the  science  ? 

His  theory  of  markets  was  for  a  long  time  considered  first- 
class  work.  "  Products  are  given  in  exchange  for  products."  It 
is  a  happy  phrase,  but  it  is  not  in  truth  very  profound.  It 
simply  gives  expression  to  an  idea  that  was  quite  familiar  to  the 
Physiocrats  and  to  Smith,  namely,  that  money  is  but  an  inter- 
mediary which  is  acquired  only  to  be  passed  on  and  exchanged  for 
another  product.  "  Once  the  exchange  has  been  effected  it  is 
immediately  discovered  that  products  pay  for  products."  f  Thus 
goods  constitute  a  demand  for  other  goods,  and  the  interest  of  a 
country  that  produces  much  is  that  other  countries  should  produce 
at  least  as  much.  Say  thought  that  the  outcome  of  this  would  be 
the  advent  of  the  true  brotherhood  of  man.  "  The  theory  of  markets 
will  change  the  whole  policy  of  the  world,"  said  he.8  He  thought 
that  the  greater  part  of  the  doctrine  of  Free  Trade  could  be  based 
upon  this  principle.  But  to  expect  so  much  from  such  a  vague,  self- 
evident  formula  was  to  hope  for  the  impossible. 

Still  more  interesting  is  the  way  in  which  he  applied  this  **  theory 
of  markets  "  to  a  study  of  over-production  crises,  and  the  light  which 
that  sheds  upon  the  nature  of  Say's  thought.  Garnier  had  already 
pointed  out  that  a  general  congestion  of  markets  was  possible.  As 
crises  multiplied  this  fear  began  to  agitate  the  minds  of  a  number  of 
thinkers.  "  Nothing  can  be  more  illogical,"  writes  Say.  "  The  total 
supply  of  products  and  the  total  demand  for  them  must  of  necessity 
be  equal,  for  the  total  demand  is  nothing  but  the  whole  mass  of 

1  "  Bent,"  he  says,  "  doubtless  is  partly  interest  on  capital  buried  in  the  soil, 
for  there  are  few  properties  which  do  not  owe  something  to  improvements  made 
in  them.  But  their  total  value  is  seldom  due  to  this  alone.  It  might  be  if  the 
land  were  fertile  but  lacked  the  necessary  facilities  for  cultivation.  But  this 
is  never  the  case  in  civilised  countries."  (Critical  examination  of  McCullooh'a 
treatise  (1825),  in  (Euvres  diverse*,  p.  277.) 

»  Traite,  1st  ed.,  p.  154. 

*  "  The  theory  of  heat  and  of  weight  and  the  study  of  the  inclined  plane  have 
placed  the  whole  of  nature  at  the  disposal  of  mankind.  In  the  same  way  the 
theory  of  exchange  and  of  markets  will  change  the  whole  policy  of  the  world.** 
[Jlid.,  6th  ed.,  p.  51.) 


116  ADAM  SMITH 

commodities  which  have  been  produced :  a  general  congestion 
would  consequently  be  an  absurdity."  l  It  would  simply  mean  a 
genera]  increase  of  wealth,  and  "  wealth  is  none  too  plentiful  among 
nations,  any  more  than  it  is  among  individuals."  2  We  may  have  an 
inefficient  application  of  the  means  of  production,  resulting  in  the 
over-production  of  some  one  commodity  or  other — i.e.  we  may  have 
partial  over-production.8  Say  wishes  to  emphasise  the  fact  that 
we  need  never  fear  general  over-production,  but  that  we  may  have 
too  much  of  some  one  product  or  other.  He  frequently  gave 
expression  to  this  idea  in  the  form  of  paradoxes.  We  might  almost 
be  led  to  believe  that  he  denies  the  existence  of  crises  altogether  in 
the  second  edition  of  his  work.4  In  reality  he  was  very  anxious  to 
admit  their  existence,  but  he  wished  to  avoid  everything  that  might 
prove  unfavourable  to  an  extension  of  industry.5 

He  thought  that  crises  were  essentially  transient,  and  declared 
that  individual  liberty  would  be  quite  enough  to  prevent  them.  He 
was  extremely  anxious  to  get  rid  of  the  vague  terrors  which  had 
haunted  those  people  who  feared  that  they  would  not  be  able  to 
consume  all  this  wealth,  of  a  Malthus  who  thought  the  existence  of 
the  idle  rich  afforded  a  kind  of  safety-valve  which  prevented  over- 
production,6 of  a  Sismondi  who  prayed  for  a  slackening  of  the  pace 

1  Traite,  1st  ed.,  vol.  ii,  p.  175* 

*  Ibid.,  p.  179. 

*  Ibid.,  p.  178. 

*  "  One  kind  of  product  would  seldom  be  more  plentiful  than  another  and 
goods  would  seldom  be  too  many  if  everyone  were  given  complete  freedom." 
Too  much  stress  has  possibly  been  laid  on  the  phrase  "  Certain  products  are 
superabundant  just  because  others  are  wanting,"  and  it  has  been  taken  as  imply- 
ing that  even  partial  over-production  is  an  impossibility.     A  note  inserted  on 
the  next  page  helps  to  clear  up  the  matter  and  to  prevent  misunderstanding. 
"  The  argument  of  the  chapter,"  Bays  he,  "  is  not  that  partial  over-production 
is  impossible,  but  merely  that  the  production  of  one  thing  creates  the  demand 
for  another."     He  certainly  seems  unfaithful  to  his  own  position  in  the  letters 
he  wrote  to  Malthus,  in  which  he  tries  to  defend  his  own  point  of  view 
by  saying  that  "  production  implies  producing  goods  that  are  demanded,"  and 
that  consequently  if  there  is  any  excessive  production  it  is  not  the  fault  of 
production  as  such  and  cannot  be  regarded  as  over-production.     In  greater  con- 
formity with  his  own  views  and  much  nearer  the  truth  is  his  reply  to  an  article 
by  Sismondi  published  in  1824  in  the  Revue  enc.yclopedique  under  the  title  Sur 
la  Balance  des  Consommations  avec  Its  Productions  ((Euvres  diverges,  p.  250).    His 
statements  vary  from  one  edition  to  another,  and  anything  more  unstable  than 
Say's  views  on  this  question  would  be  difficult  to  imagine.     The  formula  "  Pro- 
ducts exchange  for  products  "  is  so  general  that  it  includes  everything,  but  means 
nothing  at  all ;  for  what  is  money,  after  all,  if  it  is  not  a  product  ? 

*  Letters  to  Malthus  (CEuvrta  diverges,  p.  466). 

6  Malthus,  Principles  of  Political  Economy,  Book  II,  chap.  I,  sect.  9. 


INFLUENCE  OF  THOUGHT  AND  ITS  DIFFUSION     117 

of  industrial  progress  and  a  checking  of  inventions.  Such  thoughts 
arouse  his  indignation,  especially,  as  he  remarks,  when  it  is  remem- 
bered that  even  among  the  most  flourishing  nations  "  seven-eighths 
of  the  population  are  without  a  great  number  of  products  which  would 
be  regarded  as  absolute  necessities,  not  by  a  wealthy  family,  but  even 
by  one  of  moderate  means."  1  The  inconvenience — and  he  is  never 
tired  of  repeating  it — is  not  the  result  of  over-production,  but  is 
the  effect  of  producing  what  is  not  exactly  wanted.2  Produce, 
produce  all  that  you  can,  and  in  the  natural  course  of  events  a  lower- 
ing of  prices  will  benefit  even  those  who  at  first  suffered  from  the 
extension  of  industry. 

In  this  once  famous  controversy  between  Say,  Malthus,  Sismondi, 
and  Ricardo  (the  latter  sided  with  Say)  we  must  not  expect  to  find 
a  clear  exposition  of  the  causes  of  crises.  Indeed,  that  is  nowhere 
to  be  found.  All  we  have  here  is  the  expression  of  a  sentiment 
which  is  at  bottom  perfectly  just,  but  one  which  Say  wrongly 
attempted  to  state  in  a  scientific  formula. 

J.  B.  Say  plays  a  by  no  means  negligible  part  in  the  history  of 
doctrines.  Foreign  economists  have  not  always  recognised  him. 
Duhring,  who  is  usually  perspicacious,  is  very  unjust  to  him  when  he 
speaks  of  "  the  labour  of  dilution  "  to  which  Say  devoted  his  energies.3 
His  want  of  insight  frequently  caused  him  to  glide  over  problems 
instead  of  attempting  to  fathom  them,  and  his  treatment  of  political 
economy  occasionally  appears  very  superficial.  Certain  difficulties 
are  veiled  with  pure  verbiage — a  characteristic  in  which  he  is  very 
frequently  imitated  by  Bastiat.  Despite  Say's  greater  lucidity,  it 
is  doubtful  whether  Smith's  obscurity  of  style  is  not,  after  all,  more 
stimulating  for  the  mind.  Notwithstanding  all  this,  he  was  faithful 
in  his  transmission  of  the  ideas  of  the  great  Scotch  economist  into 
French.  Happily  his  knowledge  of  Turgot  and  Condillac  enabled 
him  to  rectify  some  of  the  more  contestable  opinions  of  his  master, 
and  in  this  way  he  avoided  many  of  the  errors  of  his  successors. 
He  has  left  his  mark  upon  French  political  economy,  and  had  the 
English  economists  adopted  his  conception  of  the  entrepreneur  earlier, 
instead  of  waiting  until  the  appearance  of  Jevons,  they  would  have 
spared  the  science  many  useless  discussions  provoked  by  the  work 

1  Sur  la  Balance  des  Consommations  avec  lea  Productions,  p.  £  52. 

»  Ibid.,  p.  251. 

'  Duhring,  Kritische,  Geschichte  der  Nalionalokonomie  und  des  Socialismua, 
2nd  ed.,  1875,  p.  165.  For  the  other  side  of  the  question  one  may  profitably 
peruse  the  interesting  study  of  Say  contributed  by  M.  Allix  to  the  Rtvue 
d'Economie  politique,  1910  (pp.  303-341),  and  the  Revue  d'Hinloire  des  Doctrines, 
1911,  p.  321. 


118  THE  PESSIMISTS 

of  a  thinker  who  was  certainly  more  profound  but  much  less  judicious 
than  Say,  namely,  David  Ricardo.1 


CHAPTER  III:    THE  PESSIMISTS 

A  NEW  point  of  view  is  presented  to  us  by  the  economists  of  whom 
we  are  now  going  to  speak.  Hitherto  we  have  heard  with  admira- 
tion of  the  discovery  of  new  facts  and  of  their  beneficent  effects  both 
upon  nations  and  individuals.  We  are  now  to  witness  the  enuncia- 
tion of  new  doctrines  which  cast  a  deepening  shadow  across  the 
radiant  dawn  of  economics,  giving  it  that  strangely  sinister  aspect 
which  led  Carlyle  to  dub  it  "  the  dismal  science." 

Hence  the  term  "Pessimists,"  although  no  reproach  is  implied 
in  our  use  of  that  term.  On  the  contrary,  we  shall  have  to  show 
that  the  theories  of  the  school  are  often  truer  than  those  of  the 
Optimists,  which  we  must  study  at  a  later  stage  of  our  survey.  While 
nominally  subscribing  to  their  predecessors'  doctrine  concerning  the 
identity  of  individual  and  general  interests,  the  many  cogent  reasons 
which  they  have  adduced  against  such  belief  warrants  our  classifica- 
tion. The  antagonism  existing  between  proprietors  and  capitalists, 
between  capitalists  and  workmen,  is  a  discovery  of  theirs.  Instead 
of  the  "  natural  "  or  "  providential  "  laws  that  were  to  secure  the 
establishment  of  the  "  order  "  provided  they  were  once  thoroughly 
understood  and  obeyed,  they  discovered  the  existence  of  other  laws, 
such  as  that  of  rent,  which  guaranteed  a  revenue  for  a  minority  of 
idle  proprietors — a  revenue  that  was  destined  to  grow  as  the  direct 
result  of  the  people's  growing  need  ;  or  the  "  law  of  diminishing  re- 
turns," which  sets  a  definite  limit  to  the  production  of  the  necessaries 
of  life.  That  limit,  they  asserted,  was  already  being  approached, 
and  mankind  had  no  prospect  of  bettering  its  lot  save  by  the 
voluntary  limitation  of  its  numbers.  There  was  also  the  tendency 
of  profits  to  fall  to  a  minimum — until  it  seemed  as  if  the  whole  of 

1  Stanley  Jevons  (Theory  of  Political  Economy,  3rd  ed.,  1888)  has  recognised 
in  too  absolute  a  fashion,  perhaps,  the  superiority  of  the  French  economists 
over  Ricardo.  "  The  true  doctrine  may  be  more  or  less  clearly  traced  through 
the  writings  of  a  succession  of  great  French  economists,  from  Condillac,  Baudeau, 
and  Le  Trosne,  through  J.  B.  Say,  Destutt  de  Tracy,  Storch,  and  others,  down 
to  Bastiat  and  Courcelle-Seneuil.  The  conclusion  to  which  I  am  ever  more 
clearly  coming  is  that  the  only  hope  of  attaining  a  true  system  of  economics 
is  to  fling  aside,  once  and  for  ever,  the  mazy  and  preposterous  assumptions  of  the 
E-icardian  School."  (Preface,  p. 


THE  PESSIMISTS  119 

human  industry  would  sooner  or  later  be  swallowed  up  by  the 
stagnant  waters  of  the  stationary  State. 

Lastly,  they  deserve  to  be  classed  as  pessimists  because  ot  their 
utter  disbelief  in  the  possibility  of  changing  the  course  of  these 
inevitable  laws  either  by  legislative  reform  or  by  organised  voluntary 
effort.  In  short,  they  had  no  faith  in  what  we  call  progress. 

But  we  must  never  imagine  that  they  considered  themselves 
pessimists  or  were  classed  as  such  by  their  contemporaries.  This 
verdict  is  posterity's,  and  would  have  caused  them  no  little  surprise. 
As  for  themselves,  they  seem  to  stand  aloof  from  their  systems  with 
an  insouciance  that  is  most  disconcerting.  The  "  present  order  of 
things  "  possessed  no  disquieting  features  for  them,  and  they  never 
doubted  the  wisdom  of  "  Nature's  Lord."  They  believed  that 
property  had  been  put  upon  an  immovable  basis  when  they  demon- 
strated the  extent  of  its  denotation,  and  that  the  spirit  of  revolt  had 
been  disarmed  by  impressing  upon  the  poor  a  sense  of  responsibility 
for  their  own  miseries.1 

The  best  known  representatives  of  the  school  are  Malthus  and 
Ricardo.  They  claimed  to  be  philanthropists  and  friends  of  the 
people,  and  we  have  no  reason  to  suspect  their  sincerity.2  Their 
contemporaries,  also,  far  from  being  alarmed,  received  the  new 
political  economy  with  the  greatest  enthusiasm.  A  warm  welcome 
was  extended  to  its  apostles  by  the  best  of  English  society,3  and 
ladies  of  distinction  contended  with  one  another  for  the  privilege 
of  popularising  the  abstract  thoughts  of  Ricardo  in  newspaper 
articles  and  popular  tales.4 

1  "The  people  must  comprehend  that  they  are  themselves  the  cause  of  their 
own  poverty."  (Malthus,  p.  458.)  Doubtless  this  is  the  reason  why  M.  Hal6vy, 
among  others,  in  his  book  Le  Radicalisme  philosophique,  remarks  that  Ricardo, 
Malthus,  and  their  disciples  were  regarded  as  the  exponents  of  optimism  and 
quietism.  But  in  what  sense  were  they  optimists  T  Of  course  they  believed 
that  the  existing  economic  order  is  the  best  possible,  and  that  it  would  be  impossible 
to  change  it  for  a  better.  That  may  be.  But  we  prefer  to  think  of  them  as 
"  contented  pessimists." 

1  "  Every  reader  of  candour  must  acknowledge  that  the  practical  design 
uppermost  in  the  mind  of  the  writer,  with  whatever  want  of  judgment  it  may 
have  been  executed,  is  to  improve  the  condition  and  increase  the  happiness  of  the 
lower  classes  of  society."  It  is  with  this  declaration  that  Malthus  brings  his  book 
on  population  to  a  close. 

1  Miss  Edgeworth,  a  contemporary  of  Ricardo,  states  in  her  letters  that 
political  economy  was  so  much  the  fashion  that  distinguished  ladies  before 
engaging  a  governess  for  their  children  inquired  about  her  competence  to  teach 
political  economy. 

*  Conversations  on  Political  Economy,  by  Mrs.  Marcet  (1816).  Illustrations  of 
Political  Economy,  by  Miss  Martineau  (9  vols.,  containing  thirty  stories,  1832-34). 


120  THE  PESSIMISTS 

Neither  should  we  omit  to  pay  them  full  homage  for  the  eminent 
services  rendered  to  the  science,  and  among  these  not  the  least 
important  was  the  antagonism  which  their  theories  aroused  in  the 
minds  of  the  working  classes.  Pessimists  unwittingly  often  do 
more  for  progress  than  optimists.  To  these  two  writers  fell  the  task 
of  criticising  economic  doctrines  and  institutions,  a  task  that  has 
been  taken  up  by  other  writers  in  the  course  of  the  century,  but 
which  seems  as  far  from  completion  as  ever.  Karl  Marx,  another 
critic,  is  intellectually  a  scion  of  the  Ricardian  family.  It  would 
be  a  mistake  to  imagine  that  all  their  theories  savour  of  pessimism, 
but  their  reputation  has  always  been  more  or  less  closely  linked  with 
the  gloomier  aspect  of  their  teaching. 


I  :  MALTHUS * 

MALTHUS  is  best  known  for  his  "  law  of  population."  That  he  was 
a  great  economist,  even  apart  from  his  study  of  that  question,  might 
easily  be  proved  by  reference  to  his  treatise  on  political  economy, 
or  by  a  perusal  of  the  many  miscellaneous  articles  which  he  wrote 
on  various  economic  questions.  A  consideration  of  many  of  these 
theories,  notably  the  theory  of  rent,  must  be  postponed  until  we 
come  to  study  them  in  connection  with  the  name  of  Ricardo. 

1  Thomas  Robert  Malthus  was  born  in  1766.  His  father,  a  country  gentle- 
man, was  a  man  of  learning  and  a  friend  of  most  of  the  philosophers  of  his  time, 
especially  Hume,  and,  it  also  seems,  J.  J.  Rousseau.  He  was  the  youngest 
son  of  the  family,  and  was  intended  for  the  Church  and  given  an  excellent 
education.  After  leaving  Cambridge  he  took  a  living  in  the  country,  but  in 
1807  was  appointed  professor  at  a  college  founded  by  the  East  India  Com- 
pany at  Haileybury,  in  Hertfordshire,  where  he  remained  until  his  death  in 
1834.  He  married  when  thirty -nine  years  of  age,  and  had  three  sons  and  a 
daughter. 

Malthus  was  a  young  unmarried  clergyman  living  in  a  small  country  parish 
when,  at  the  age  of  thirty-two,  he  in  1798  published  anonymously  his  famous 
Essay  on  the  Principle  of  Population  as  it  affects  the  Future  Improvement  of  Society. 
His  critics  were  legion.  In  order  to  devote  more  study  to  the  subject,  he 
took  a  three  years'  tour  (1799-1802)  on  the  Continent — avoiding  France,  because 
France  at  this  period  was  anything  but  inviting  to  an  Englishman.  In  1803  he 
published — under  his  own  name  this  time — a  second  edition,  much  modified  and 
amplified,  and  with  a  slightly  different  title :  An  Essay  on  the  Principle  of 
Population,  or  a  View  of  its  Past  and  Present  Effects  on  Human  Happiness.  Four 
other  editions  were  published  during  his  lifetime. 

We  must  not  forget  his  other  works,  although  they  were  all  eclipsed  by  his 
earliest  effort.  These  were:  The  Principles  of  Political  Economy  considered 
with  a  View  to  their  Practical  Application  (1820) ;  A  Series  of  Short  Studies  dealing 
with  the  Corn  Laws  (1814-15) ;  On  Rent  (1815)  ;  The  Poor  Law  (1817) ;  and 
finally  his  Definitions  in  Political  Economy  (1827). 


MALTHUS  121 

THE  LAW  OF  POPULATION 

Twenty  years  had  elapsed  since  the  publication  of  Smith's  im- 
mortal work,  without  economics  making  any  advance,  when  the 
appearance  of  a  small,  anonymous  volume,  known  to  be  the  work  of 
a  country  clergyman,  caused  a  great  sensation.  Even  after  the 
lapse  of  a  century  the  echo  of  the  controversy  which  it  aroused 
has  not  altogether  passed  away.  At  first  sight  one  might  be  led  to 
think  that  the  book  touches  only  the  fringe  of  economics,  seeing 
that  it  is  chiefly  a  statistical  study  of  population,  or  demography, 
as  the  science  is  called  to-day.  But  this  new  science,  of  which 
Malthus  must  be  regarded  as  the  founder,  was  separated  from  the 
main  trunk  of  economics  at  a  much  later  date.  Furthermore,  we 
shall  find  that  the  influence  of  his  book  upon  all  economic  theories, 
both  of  production  and  distribution,  was  enormous.  The  essay 
might  even  be  considered  a  reply  to  that  of  Adam  Smith.  The  same 
title  with  slight  modification  would  have  served  well  enough,  and 
James  Bonar  wittily  remarks  that  Malthus  might  have  headed  it 
An  Essay  on  the  Causes  of  the  Poverty  of  Nations. 

The  attempt  to  explain  the  persistence  of  certain  economic 
phenomena  by  connecting  them  with  the  presence  of  a  new  factor, 
biological  in  its  character  and  differing  in  its  origin  both  from  personal 
interest  and  the  mere  desire  for  profit,  considerably  expanded  the 
economic  horizon  and  announced  the  advent  of  sociology.  We  know 
that  Darwin  himself  acknowledged  his  indebtedness  to  the  work  of 
Malthus  for  the  first  suggestion  of  what  eventually  became  the  most 
celebrated  scientific  doctrine  of  the  nineteenth  century,  namely,  the 
conception  of  the  struggle  for  existence  and  the  survival  of  the  fittest 
as  one  of  the  mainsprings  of  progress. 

There  is  no  necessity  for  thinking  that  the  dangers  which  might 
result  from  an  indefinite  growth  of  population  had  not  engaged  the 
attention  of  previous  writers.  In  France  Buffon  and  Montesquieu 
bad  already  shown  some  concern  in  the  matter.  But  a  numerous 
population  was  usually  regarded  as  advantageous,  and  fear  of  excess 
was  never  entertained  inasmuch  as  it  was  believed  that  the  number 
of  people  would  always  be  limited  by  the  available  means  of  sub- 
sistence.1 This  was  the  view  of  the  Physiocrat  Mirabeau,  stated  in 
his  own  characteristic  fashion  in  his  book  IS  Ami  des  Hommes,  which 
has  for  its  sub-title  Traiti  de  la  Population.  Such  a  natural  fact  as 
the  growth  of  population  could  possess  no  terrors  for  the  advocates 
of  the  "  natural  order."  But  in  the  writings  of  Godwin  this  "  natural " 
optimism  assumed  extravagant  proportions.  His  book  on  Political 
1  S»e  Stangeland,  Pre-Malthuaian  Doctrines  (New  York,  1904). 

8.D  E 


122  THE  PESSIMISTS 

Justice  appeared  in  1793  and  greatly  impressed  the  public.  Godwin, 
it  has  been  well  said,  was  the  first  anarchist  who  was  also  a  doctrinaire. 
At  any  rate  he  seems  to  have  been  the  first  to  employ  that  famous 
phrase,  "  Government  even  in  its  best  state  is  an  evil."  His  illimit- 
able confidence  in  the  future  of  society  and  the  progress  of  science, 
which  he  thought  would  result  in  such  a  multiplicity  of  products 
that  half  a  day's  work  would  be  sufficient  to  satisfy  every  need, 
and  his  belief  in  the  efficacy  of  reason  as  a  force  which  would 
restrain  personal  interest  and  check  the  desire  for  profit,  really  en- 
titles him  to  be  considered  a  pioneer.  But  life  having  become  so 
pleasant,  was  there  no  possibility  that  men  might  then  multiply 
beyond  the  available  means  of  subsistence  ?  Godwin  was  ignorant 
of  the  terrible  intricacies  of  the  problem  he  had  thus  raised,  and  he 
experienced  no  difficulty  in  replying  that  such  a  result,  if  it  ever 
came  to  pass,  must  take  several  centuries,  for  reason  may  prove  as 
powerful  in  controlling  the  sexual  instinct  as  in  restraining  the 
desire  for  profit.  Godwin  even  goes  so  far  as  to  outline  a  social  State 
in  which  reason  shall  so  dominate  sense  that  reproduction  will  cease 
altogether  and  man  will  become  immortal.1 

Almost  at  the  same  time  there  appeared  in  France  a  volume 
closely  resembling  Godwin's,  entitled  Esquisse  d'un  Tableau  his- 
torique  des  Progres  de  VEsprit  humain,  written  by  Condorcet  (1794). 
It  displays  the  same  confidence  in  the  possibility  of  achieving 
happiness  through  the  all-powerful  instrumentality  of  science,  which, 
if  not  destined  actually  to  overcome  death,  was  at  least  going  to 
postpone  it  indefinitely.2  This  optimistic  book,  written  by  a  man 
who  was  about  to  poison  himself  in  order  to  escape  the  guillotine, 
cannot  leave  us  quite  unmoved.  But,  death  abolished,  Condorcet 
finds  that  he  has  to  face  the  old  question  propounded  to  Godwin  : 
"  Can  the  earth  always  be  relied  upon  to  supply  sufficient  means  of 
subsistence  ?  "  To  this  question  he  gives  the  same  answer  :  either 
science  will  be  able  to  increase  the  means  of  subsistence  or  reason 
will  prevent  an  inordinate  growth  of  population. 

It  was  inevitable,  in  accordance  with  the  law  of  rhythm  which 
characterises  the  movements  of  thought  no  less  than  the  forces  of 
nature,  that  such  hasty  optimism  should  provoke  a  reaction.  It 
was  not  long  in  coming,  and  in  Malthus's  essay  we  have  it  developed 
in  fullest  detail. 

To  the  statement  that  there  are  no  limits  to  the  progress  of 

»  Godwin,  Political  Justice,  Book  VIII,  chap.  7  (reprinted,  London,  1890). 
1  "  Man  doubtless  will  never  become  immortal,  but  it  is  possible  that  the 
span  of  human  life  may  be  indefinitely  prolonged." 


MALTHUS  123 

mankind  either  in  wealth  or  happiness,  and  that  the  fear  of  over- 
population is  illusory,  or  at  any  rate  so  far  removed  that  it  need 
cause  no  apprehension,  Malthus  replied  that,  on  the  contrary,  we 
have  in  population  an  almost  insurmountable  obstacle,  not  merely 
looming  in  the  distant  future,  but  pressing  and  insistent l — the  stone 
of  Sisyphus  destined  to  be  the  cause  of  humanity's  ceaseless  toil 
and  final  overthrow.  Nature  has  planted  an  instinct  in  man  which, 
left  to  itself,  must  result  in  starvation  and  death,  or  vice.  This  is  the 
one  fact  that  affords  a  clue  to  men's  suffering  and  a  key  to  the  history 
of  nations  and  their  untold  woes. 

Everyone,  however  little  acquainted  with  sociological  study, 
knows  something  of  the  memorable  formula  by  which  Malthus  endea- 
voured to  show  the  contrast  between  the  frightful  rapidity  with  which 
population  grows  when  it  is  allowed  to  take  its  own  course  and  the 
relative  slowness  in  the  growth  of  the  means  of  subsistence.  The 
first  is  represented  by  a  geometrical  series  where  each  successive 
number  is  a  multiple  of  the  previous  one.  The  second  series  increases 
in  arithmetical  progression,  that  is,  by  simple  addition,  the  illustra- 
tion being  simply  a  series  of  whole  numbers  : 

1       2       4       8       16       32       64       128       256 
12345678  9 

Every  term  corresponds  to  a  period  of  twenty-five  years,  and  a 
glance  at  the  figures  will  show  us  that  population  is  supposed  to 
double  every  twenty- five  years,  while  the  means  of  subsistence 
merely  increases  by  an  equal  amount  during  each  of  these  periods. 
Thus  the  divergence  between  the  two  series  grows  with  astonishing 
rapidity.  In  the  table  given  above,  containing  only  nine  terms, 
the  population  figure  has  already  grown  to  twenty-seven  times  the 
means  of  subsistence  in  a  period  of  225  years.  Had  the  series  been 
extended  up  to  the  hundredth  term  a  numerical  representation  of 
the  divergence  would  have  required  some  ingenuity. 

The  first  progression  may  be  taken  as  correct,  representing  as  it 
does  the  biological  law  of  generation.  The  terms  "  generation  "  and 
'*  multiplication  "  are  not  used  as  synonyms  without  some  purpose. 
It  is  true  that  doubling  supposes  four  persons  to  arrive  at  the 
marriageable  age,  and  this  means  five  or  six  births  if  we  are  to  allow 

1  Chap.  8  is  entitled  "  The  Error  of  Thinking  that  the  Danger  resulting  from 
Population  is  Remote."  "  There  are  few  States  in  which  there  is  not  a  constant 
effort  in  the  population  to  increase  beyond  the  means  of  subsistence.  This 
constant  effort  as  constantly  tends  to  subject  the  lower  classes  of  society  to 
distress,  and  to  prevent  any  great  permanent  amelioration  of  their  condition." 
(P.  10.) 


124  THE  PESSIMISTS 

for  the  inevitable  wastage  from  infant  mortality.  This  figure  appears 
somewhat  high  to  those  who  live  in  a  society  where  limitation  of  the 
birth-rate  is  fairly  usual.  But  it  is  certain  that  among  living  beings 
in  general,  including  humankind,  who  are  least  prolific,  the  number 
of  births  where  no  restraint  of  any  kind  exists  is  really  much  higher. 
Women  have  been  known  to  give  birth  to  twenty  or  even  more 
children.  And  there  are  no  signs  of  diminishing  capacity  among  the 
sexes,  for  population  is  still  growing.  In  taking  two  as  his  coefficient 
Mai  thus  has  certainly  not  overstepped  the  mark.1 

The  period  of  twenty-five  years  as  the  interval  between  the  two 
terms  is  more  open  to  criticism.2  The  practice  of  reckoning  three 
generations  to  a  century  implies  that  an  interval  of  about  thirty- 
three  years  must  elapse  between  one  generation  and  another. 

But  these  are  unimportant  details.  It  is  immaterial  whether 
we  lengthen  the  interval  between  the  two  terms  from  twenty-five 
to  thirty- three  years,  or  reduce  the  ratio  from  2  to  1  £ ,  or  even  to  some- 
thing between  1 J  and  1^.  The  movement  will  be  a  little  slower, 
but  it  is  enough  that  its  geometrical  character  should  be  admitted, 
for  however  slow  it  moves  at  first  it  will  grow  by  leaps  and  bounds 
until  it  surpasses  all  limits.  These  corrections  fail  to  touch  the  real 
force  of  Malthus's  reasoning  concerning  the  law  of  reproduction. 

The  series  representing  the  growth  of  the  means  of  subsistence  is 
also  open  to  criticism.  It  is  evidently  of  a  more  arbitrary  character, 
and  we  cannot  say  whether  it  is  simply  supposed  to  represent  a 
possible  contingency  like  the  first,  or  whether  it  pretends  to  represent 
reality.  At  least  it  does  not  correspond  to  any  known  and  certain 
law,  such  as  the  law  of  reproduction.  As  a  matter  of  fact  it  rather 

1  If  two  children  were  the  normal  issue  of  every  marriage,  population  would 
evidently  diminish,  for  all  the  children  will  not  reach  the  marriageable  age.  Of 
those  that  do  all  will  not  become  parents.  Experience  seems  to  show  that  with 
a  birth-rate  of  less  than  three  per  family  population  does  not  increase,  or  if 
it  does  grow  at  all  it  is  almost  imperceptibly.  This  is  the  case  in  France,  where 
on  an  average  there  are  2-70  births  to  every  marriage. 

To  justify  multiplying  by  two,  Malthus  regards  a  family  of  six  as  being  a  normal 
one.  Of  the  six,  two  will  die  before  attaining  marriageable  age,  or  will  remain 
celibates,  so  that  we  are  left  with  four,  who  will  in  turn  become  parents,  and  so  we 
have  the  series  2,  4,  etc. 

-  The  statement  that  population  doubles  every  twenty-five  years  might 
appear  to  be  confirmed  by  the  growth  of  population  in  the  United  States.  It 
is  curious  to  find  that  the  population  there  during  the  nineteenth  century 
conforms  exactly  to  Malthus's  formula.  In  1800  it  was  5  millions.  Doubling 
four  times  (4  periods  of  25  years  =  100)  gives  us  a  population  of  80  millions, 
which  is  actually  the  figure  for  1905,  five  years  after  the  end  of  the  century. 
But  of  course  this  is  pure  chance,  the  increase  resulting  from  immigration  rather 
than  a  rising  birth-rate. 


MALTHUS  125 

seems  to  give  it  the  lie  ;  for,  in  short,  what  is  meant  by  means  of 
subsistence  unless  we  are  to  understand  the  animal  and  vegetable 
species  that  reproduce  themselves  according  to  the  same  laws  as 
human  beings,  only  at  a  much  faster  rate  ?  The  power  of  reproduc- 
tion among  plants,  like  corn  or  potatoes,  or  among  animals,  like 
fowls,  herrings,  cattle  even,  or  sheep,  far  surpasses  that  of  man.  To 
this  criticism  Malthus  might  have  replied  as  follows.  This  virtual 
power  of  reproduction  possessed  by  these  necessaries  of  life  is  in 
reality  confined  to  very  limited  areas  of  the  habitable  globe.  It  is 
further  restricted  by  the  difficulty  of  obtaining  the  proper  kind  of 
nourishment,  and  by  the  struggle  for  existence.  But  if  we  admit 
exceptions  in  the  one  case  why  not  also  in  the  other  ?  It  certainly 
seems  as  if  there  were  some  inconsistency  here.  As  a  matter  of  fact 
we  have  two  different  theses.  The  one  attempts  to  show  how 
multiplication  or  reproduction  need  not  of  necessity  be  less  rapid 
among  plants  or  animals  than  it  is  among  men.  The  other  ex- 
presses what  actually  happens  by  showing  that  the  obstacles  to 
the  indefinite  multiplication  of  men  are  not  less  numerous  than  the 
difficulties  in  the  way  of  an  indefinite  multiplication  of  vegetables 
or  animals,  or,  in  other  words,  that  the  former  is  a  function  of  the 
latter. 

In  order  to  grasp  the  true  significance  of  the  second  formula  it 
must  be  translated  from  the  domain  of  biology  into  the  region  of 
economics.  Malthus  evidently  thought  of  it  as  the  amount  of  corn 
yielded  by  a  given  quantity  of  land.  The  English  economists  could 
think  of  nothing  except  in  terms  of  corn !  What  he  wished  to 
point  out  was  that  the  utmost  we  can  expect  in  this  matter  is  that 
the  increase  in  the  amount  of  the  harvest  should  be  in  arithmetical 
progression — say,  an  increase  of  two  hectolitres  every  twenty-five 
years.  This  hypothesis  is  really  rather  too  liberal.  Lavoisier 
in  1789  calculated  that  the  French  crop  yielded  on  an  average 
about  7f  hectolitres  per  hectare.  During  the  last  few  years  it 
has  averaged  about  16,  and  if  we  admit  that  the  increment  has  been 
regular  throughout  the  120  years  which  have  since  elapsed  we  have 
an  increase  of  2  hectolitres  per  25  years.  This  rate  of  increase  has 
proved  sufficient  to  meet  the  small  increase  which  has  taken  place  in 
the  population  of  France.  But  would  it  have  sufficed  for  a  popula- 
tion growing  as  rapidly  as  that  of  England  or  Germany  ?  Assuredly 
not,  for  these  countries,  despite  their  superior  yields,  are  forced  to 
import  from  outside  a  great  proportion  of  the  grain  which  they  con- 
sume. The  question  arises  whether  France  can  continue  indefinitely 
on  the  same  basis  during  the  course  of  the  coming  centuries.  This 


126  THE  PESSIMISTS 

is,  indeed,  unlikely,  for  there  must  be  a  physical  limit  to  the  earth's 
capacity  on  account  of  the  limited  number  of  elements  it  contains. 
The  economic  limit  will  be  reached  still  earlier  because  of  the  in- 
creasing cost  of  attempting  to  carry  on  production  at  these  extreme 
limits.  Thus  it  seems  as  if  the  law  of  diminishing  returns,  which  we 
must  study  later,  were  the  real  basis  of  the  Malthusian  laws,  although 
Malthus  himself  makes  no  express  mention  of  it. 

It  is  a  truism  that  the  number  of  people  who  can  live  in  any  place 
cannot  exceed  the  number  of  people  who  can  gain  subsistence  there. 
Any  excessive  population  must,  according  to  definition,  die  of 
hunger.1  This  is  just  what  happens  in  the  animal  and  vegetable 
kingdoms.  Germs  are  extraordinarily  prolific,  but  their  undue 
multiplication  is  pitilessly  retarded  by  a  law  which  demands  the 
death  of  a  certain  proportion,  so  that  life,  like  a  well-regulated 
reservoir,  always  remains  at  a  mean  level,  the  terrible  gaps  made 
by  death  being  replenished  by  a  new  flow.  Among  savages,  just  as 
among  animals,  which  they  much  resemble,  a  large  proportion 
literally  dies  of  hunger.  Malthus  devoted  much  attention  to  the 
study  of  primitive  society,  and  he  must  be  regarded  as  one  of  the 
pioneers  of  prehistoric  sociology — a  subject  that  has  made  much 
headway  since  then. 

He  proceeds  to  show  how  insufficient  nourishment  always  brings 
a  thousand  evils  in  its  train,  not  merely  hunger  and  death,  but  also 
epidemics  and  such  terrible  practices  as  cannibalism,  infanticide,  and 
slaughter  of  the  old,  as  well  as  war,  which,  even  when  not  undertaken 
with  a  definite  view  to  eating  the  conquered,  always  results  in  robbing 
them  of  their  land  and  the  food  which  it  yielded.  These  are  the 
"  positive  "  or  "  repressive  "  checks. 

But  it  may  be  replied  that  both  among  savages  and  animals  the 
cause  of  this  insufficiency  of  food  is  an  incapacity  for  production 
rather  than  an  excess  of  population. 

Malthus  has  no  difficulty  in  answering  this  objection  by  showing 
how  savage  customs  prevailed  among  such  civilised  people  as  the 
Greeks.  And  even  among  the  most  modern  nations  the  repressive 

1  It  was  in  this  connection  that  Malthus  penned  those  famous  words  which 
have  been  so  frequently  brought  up  against  him,  although  they  were  omitted 
from  a  later  edition.  "A  man  who  is  born  into  a  world  already  posssssed,  it 
he  cannot  get  subsistence  from  his  parents  on  whom  he  has  a  just  demand,  and 
if  the  society  do  not  want  his  labour,  has  no  claim  of  rigid  to  the  smallest  portion 
of  food,  and,  in  fact,  has  no  business  to  be  where  he  is.  At  Nature's  mighty  feast 
there  is  no  vacant  cover  for  him.  She  tells  him  to  ba  gone.  .  .  ,"  On  the  other 
hand,  let  us  remember  his  services  in  reorganising  public  aesistance  in  England 
in  1832. 


MALTHUS  12? 

checks,  somewhat  mitigated  it  is  true,  are  never  really  absent. 
Famine  in  the  sense  of  absolute  starvation  is  seldom  experienced 
nowadays,  except  in  Russia  and  India,  perhaps,  but  it  is  by  no 
means  a  stranger  even  to  the  most  advanced  communities.  Tuber- 
culosis, which  involves  such  terrible  bodily  suffering,  is  nothing  but 
a  deadly  kind  of  famine.  Lack  of  food  is  also  responsible  for  the 
abnormally  high  rate  of  infant  mortality  and  for  the  premature 
death  of  the  adult  worker.  As  for  war,  it  still  demands  its  toll. 
Malthus  was  living  during  the  wars  of  the  Revolution  and  the  First 
Empire — bloody  catastrophes  that  caused  the  death  of  about  ten 
million  men,  all  in  the  prime  of  life. 

In  civilized  communities  equilibrium  is  possible  through  humaner 
methods,  in  the  substitution  of  the  preventive  check  with  its  reduced 
birth-rate  for  the  repressive  check  with  its  abnormal  death-rate. 
Here  is  an  expedient  of  which  only  the  rational  and  the  provident 
can  avail  themselves,  an  expedient  open  only  to  man.  Knowing 
that  his  children  are  doomed  to  die — perhaps  at  an  early  age — he  may 
abstain  from  having  any.  In  reality  this  is  the  only  efficacious  way 
of  checking  the  growth  of  population,  for  the  positive  check  only 
excites  new  growth,  just  as  the  grass  that  is  mown  grows  all  the 
more  rapidly  afterwards.  The  history  of  war  furnishes  many  a 
striking  illustration  of  this.  The  year  following  the  terrible  war  of 
1870-71  remains  unique  in  the  demographic  annals  of  France  on 
account  of  the  sudden  upward  trend  of  the  declining  curve  of 
natality. 

It  was  in  the  second  edition  of  his  book  that  Malthus  expanded 
his  treatment  of  the  preventive  checks,  thus  softening  the  somewhat 
harsher  aspects  of  his  first  edition.  It  is  very  important  that  we 
should  grasp  his  exact  meaning.  We  therefore  make  no  apology  for 
frequently  quoting  his  views  on  one  point  which  is  in  itself  very 
important,  but  upon  which  the  ideas  of  the  reverend  pastor  of 
Haileybury  have  been  so  often  misrepresented. 

The  preventive  check  must  be  taken  to  imply  moral  restraint. 
But  does  this  mean  abstaining  from  sexual  intercourse  during  the 
period  of  marriage  after  the  birth,  say,  of  three  children,  which  may 
be  taken  as  sufficient  to  keep  the  population  stationary  or  moderately 
progressive  ?  We  cannot  find  that  Malthus  ever  advocated  such 
abstention.  We  have  already  seen  that  he  considered  six  children 
a  normal  family,  implying  the  doubling  of  the  population  every 
twenty-five  years.  Neither  is  it  suggested  that  six  should  be 
the  maximum,  for  he  adds  :  "  It  may  be  said,  perhaps,  that  even 
this  degree  of  prudence  might  not  always  avail,  as  when  a  man 


128  THE  PESSIMISTS 

marries  he  cannot  tell  what  number  of  children  he  shall  have,  and 
many  have  more  than  six.  This  is  certainly  true."  (P.  536.) 

But  where  does  moral  restraint  come  in  ?  This  is  how  he  defines 
it :  "  Restraint  from  marriage  which  is  not  followed  by  irregular 
gratifications  may  properly  be  termed  moral  restraint "  (p.  9) ;  and  to 
avoid  any  possible  misunderstanding  he  adds  a  note :  "  By  moral 
restraint  I  would  be  understood  to  mean  a  restraint  from  marriage 
from  prudential  motives  with  a  conduct  strictly  moral  during  the 
period  of  this  restraint,  and  I  have  never  intentionally  deviated  from 
this  sense."  All  this  is  perfectly  explicit.  He  means  abstention 
from  all  sexual  intercourse  outside  the  bonds  of  marriage,  and 
the  postponement  of  marriage  itself  until  such  time  as  the  man  can 
take  upon  himself  the  responsibility  of  bringing  up  a  family — and 
even  the  complete  renunciation  of  marriage  should  the  economic 
conditions  never  prove  favourable. 

Malthus  unceremoniously  rejected  the  methods  advocated  by  those 
who  to-day  bear  his  name,  and  expressly  condemned  all  who  favoured 
the  free  exercise  of  sexual  connection,  whether  within  or  without 
the  marriage  bond,  through  the  practice  of  voluntary  sterilization. 
All  these  preventive  methods  are  grouped  together  as  vices  and  their 
evil  effects  contrasted  with  the  practice  of  moral  restraint.  Malthus  is 
equally  explicit  on  this  point.  "  Indeed,  I  should  always  particularly 
reprobate  any  artificial  and  unnatural  modes  of  checking  population. 
The  restraints  which  I  have  recommended  are  quite  of  a  different 
character.  They  are  not  only  pointed  out  by  reason  and  sanctioned 
by  religion,  but  tend  in  the  most  marked  manner  to  stimulate 
industry."  (P.  572. )  And  he  adds  these  significant  words,  so  strangely 
prophetic  so  far  as  France  is  concerned  :  "It  might  be  easy  to  fall 
into  the  opposite  mistake  and  to  check  the  growth  of  population 
altogether." 

It  is  quite  needless  to  add  that  if  Malthus  thus  made  short  work 
of  conjugal  frauds  he  all  the  more  strongly  condemned  that  other 
preventive  method,  namely,  the  institution  of  a  special  class  of 
professional  prostitutes.1  He  would  similarly  have  condemned  the 
practice  of  abortion,  of  which  scarcely  anything  was  heard  in  his  day, 
but  which  now  appears  like  a  scourge,  taking  the  place  of  infanticide 
and  the  other  barbarous  practices  of  antiquity.  Criminal  law  seems 

"  The  effect  of  anything  like  a  promiscuous  intercourse  which  prevents  the 
birth  of  children  is  evidently  to  weaken  the  best  affections  of  the  heart  and  in 
a  very  marked  manner  to  degrade  the  female  character.  And  any  other  inter- 
course would,  without  improper  arts,  bring  as  many  children  into  the  society  as 
marriage,  with  a  much  greater  probability  of  their  becoming  a  burden  to  it." 
(P.  460.) 


MALTHUS  129 

powerless  to  suppress  it,  and  it  has  already  received  the  sanction  of  a 
new  morality. 

But  apart  from  the  question  of  immoral  practices,  did  Malthus 
really  believe  that  moral  restraint  as  he  conceived  of  it  would 
constitute  an  effective  check  upon  population  ? 

He  doubtless  was  anxious  that  it  should  be  so,  and  he  tried  to 
rouse  men  to  a  holy  crusade  against  this  worst  of  all  social  evils. 
"  To  the  Christian  I  would  say  that  the  Scriptures  most  clearly  and 
precisely  point  it  out  to  us  as  our  duty  to  restrain  our  passions  within 
the  bounds  of  reason.  .  .  .  The  Christian  cannot  consider  the 
difficulty  of  moral  restraint  as  any  argument  against  its  being  his 
duty."  (P.  452.)  And  to  those  who  wish  to  follow  the  dictates  of 
reason  rather  than  the  observances  of  religion  he  remarks  :  "  This 
virtue  [chastity]  appears  to  be  absolutely  necessary  in  order  to  avoid 
certain  evils  which  would  otherwise  result  from  the  general  laws  of 
nature."  (P.  452.) l 

At  bottom  he  was  never  quite  certain  as  to  the  efficacy  of  moral 
restraint.  The  threatening  hydra  always  peered  over  the  fragile 
shield  of  pure  crystal  with  which  he  had  hoped  to  do  battle.*  He  also 
felt  that  celibacy  might  not  merely  be  ineffective,  but  would  actually 

1  "These  considerations  show  that  the  nature  of  chastity  is  not,  as  some 
have  supposed,  a  forced  produce  of  artificial  society  ;  but  that  it  has  the  most 
real  and  solid  foundation  in  nature  and  reason ;  being  apparently  the  only 
virtuous  means  of  avoiding  the  vice  and  misery  which  result  so  often  from  the 
principle  of  population."  (P.  450.) 

He  also  notes  that  this  virtue  has  usually  been  especially  commended  to 
women,  but  that  "  there  is  no  reason  for  supposing  that  the  violation  of  the  laws 
of  chastity  are  not  equally  dishonourable  for  both  sexes."  Malthus  evidently 
believed  in  one  moral  law  for  both  sexes. 

Consequently  whenever  the  reverend  gentleman  is  reproached  with  encourag- 
ing blasphemy,  a  point  upon  which  he  is  particularly  sensitive — for  example, 
when  it  is  pointed  out  that  God's  injunction  to  man  was  to  increase  and  multiply 
— he  has  no  difficulty  in  showing  that  if  procreation  is  the  will  of  Providence, 
chastity  is  dictated  by  Christianity,  and  that  the  glorious  work  of  chastity  is  to 
aid  Providence  in  keeping  even  the  balance  of  life. 

1  "  Of  the  other  branch  of  the  preventive  check,  which  comes  under  the 
head  of  vice,  though  its  effect  appears  to  have  been  very  considerable,  yet  upon 
the  whole  its  operation  seems  to  have  been  inferior  to  the  positive  checks."  (P.  140. ) 

"  I  have  said  what  I  conceive  to  be  strictly  true,  that  it  is  our  duty  to  defer 
marriage  till  we  can  feed  our  children  ;  and  that  it  is  also  our  duty  not  to  indulge 
ourselves  in  vicious  gratifications  ;  but  I  have  never  said  that  I  expected  either, 
much  less  both,  of  these  duties  to  be  completely  fulfilled.  In  this  and  a  number  of 
other  cases,  it  may  happen  that  the  violation  of  one  of  two  duties  will  enable  a 
man  to  perform  the  other  with  greater  facility.  .  .  .  The  moralist  is  still  bound 
to  inculcate  the  practice  of  both  duties,  and  each  individual  must  be  left  to  act  as  his 
conscience  shall  dictate."  (P.  560.) 

>.D.  * 


130  THE  PESSIMISTS 

prove  dangerous  by  provoking  the  vices  it  was  intended  to  check. 
Its  prolongation,  or  worse  still  its  perpetuation,  could  never  be  favour- 
able to  good  morals. 

Malthus  was  faced  with  a  terrible  dilemma,  and  the  uncom- 
promising ascetic  is  forced  to  declare  himself  a  utilitarian  philosopher 
of  the  Benthamite  persuasion.  He  has  now  to  condone  those  prac- 
tices which  satisfy  the  sexual  instinct  without  involving  maternity, 
although  at  an  earlier  stage  he  characterised  them  as  vices.  It 
seemed  to  him  to  be  the  lesser  of  two  evils,  for  over-population  1  is 
itself  the  cause  of  much  immorality,  with  its  misery,  its  promiscuous 
living  and  licence.  All  of  which  is  very  true.1  At  the  same  time  the 
rule  of  conduct  now  prescribed  is  no  longer  that  of  "  perfect  purity." 
It  is,  as  he  himself  says,  the  grand  rule  of  utility.  "  It  is  clearly  our 
duty  gradually  to  acquire  a  habit  of  gratifying  our  passion,  only  in 
that  way  which  is  unattended  with  evil."  (P.  500. )  These  concessions 
only  served  to  prepare  the  way  for  the  Neo-Malthusians. 

Malthus  gives  us  a  picture  of  man  at  the  cross-roads.  Straight 
in  front  of  him  lies  the  road  to  misery,  on  the  right  the  path  of  virtue, 
while  on  the  left  is  the  way  of  vice.  Towards  the  first  man  is  im- 
pelled by  a  blind  instinct.  Malthus  warns  him  to  rein  in  his  desires 
and  seek  escape  along  either  by-road,  preferably  by  the  path  on  his 
right.  But  he  fears  that  the  number  of  those  who  will  accept  his 
advice  and  choose  "  the  strait  road  of  salvation  "  will  be  very  small. 
On  the  other  hand,  he  is  unwilling  to  admit,  even  in  the  secrecy  of  his 
own  soul,  that  most  men  will  probably  follow  the  road  that  leads  on  to 
vice,  and  that  masses  will  rush  down  the  easy  slope  towards  perdition. 
In  any  case  the  prospect  is  anything  but  inviting. 

No  doctrine  ever  was  so  much  reviled.     Imprecations  have  been 

"  I  should  be  extremely  sorry  to  say  anything  which  could  either  directly  or 
remotely  be  construed  unfavourably  to  the  cause  of  virtue  ;  but  I  certainly  cannot 
think  that  the  vices  which  relate  to  the  sex  are  the  only  vices  which  are  to  be 
considered  in  a  moral  question."  (P.  462.)  Malthus  omits  to  mention  the 
particular  vice  which  he  has  in  mind.  "  I  have  not  the  slightest  hesitation  in 
saying  that  the  prudential  check  [note  the  word — no  longer  "  moral  restraint "] 
to  marriage  is  better  than  premature  mortality."  (P.  560. )  We  are  far  removed 
from  the  first  edition,  where  there  is  no  mention  of  a  third  alternative  between 
chastity  and  vice. 

"  Abject  poverty  is  a  state  the  most  unfavourable  to  chastity  that  can 
well  be  conceived.  .  .  .  There  is  a  degree  of  squalid  poverty  in  which  if  a  girl 
was  brought  up  I  should  say  that  her  being  really  modest  at  twenty  was  an 
absolute  miracle."  (P.  464.)  And  elsewhere  he  writes :  "  I  maintain  that  the 
diminution  of  the  vice  which  results  from  poverty  would  afford  a  sufficient 
compensation  for  any  other  evil  that  might  follow." 


MALTHUS  181 

showered  upon  it  ever  since  Godwin's  memorable  description  of  it  as 
"  that  black  and  terrible  demon  that  is  always  ready  to  stifle  the 
hopes  of  humanity." 

Critics  have  declared  that  all  Malthus's  economic  predictions  have 
been  falsified  by  the  facts,  that  morally  his  doctrines  have  given 
rise  to  the  most  repugnant  practices,  and  not  a  few  French  writers 
are  prepared  to  hold  him  responsible  for  the  decline  in  the  French 
birth-rate.  What  are  we  to  make  of  these  criticisms  ? 

History  certainly  has  not  confirmed  his  fears.  No  single  country 
has  shown  that  it  is  suffering  from  over-population.  In  some  cases 
— that  of  France,  for  example — population  has  increased  only  very 
slightly.  In  others  the  increase  has  been  very  considerable,  but 
nowhere  has  it  outstripped  the  increase  in  wealth. 

The  following  table,  based  upon  the  decennial  censuses,  gives 
the  per  capita  wealth  of  the  population  of  the  United  States,  the 
country  from  which  Malthus  obtained  many  of  his  data  : 


Year  Dollars 

1850  .         .         .308 

1860  .         .         .514 

1870  .         .         .780 
1880  .       870 


Year  •        Dollars 

1890  .         .         .     1036 

1900  .         .         .     1227 
1905  1370 


In  fifty  years  the  wealth  of  every  inhabitant  has  more  than 
quadrupled,  although  the  population  in  the  same  interval  also  shows 
a  fourfold  increase  (23  millions  to  92  millions).1 

Great  Britain,  i.e.  England  and  Scotland,  at  the  time  Malthus 
wrote  (1800-5),  had  a  population  of  10£  millions.  To-day  it  has 
a  population  of  40  millions.  Such  a  figure,  had  he  been  able  to 
foresee  it,  would  have  terrified  Malthus.  But  the  wealth  and 
prosperity  of  Great  Britain  have  in  the  meantime  probably  quad- 
rupled also. 

Does  this  prove  the  claim  that  is  constantly  being  made,  that 
Malthus's  laws  are  not  borne  out  by  the  facts  ?  We  think  that  it  is 
correct  to  say  that  the  laws  still  remain  intact,  but  that  the  conclu- 
sions which  he  drew  from  them  were  unwarranted.  No  one  can 
deny  that  living  beings  of  every  kind,  including  the  human 
species,  multiply  in  geometrical  progression.  Left  to  itself,  with 
no  check,  such  increase  would  exceed  all  limits.  The  increase  of 

1  These  figures  only  give  the  values  expressed  in  money  by  capitalising  them 
at  the  market  rate  of  interest,  which  gives  a  rather  fictitious  result.  It  does 
not  warrant  the  belief  that  an  American  citizen  of  to-day,  however  much  his 
consumption  may  have  increased,  is  any  better  off  than  his  ancestors. 


182  THE  PESSIMISTS 

industrial  products,  on  the  other  hand,  must  of  necessity  be  limited 
by  the  numerous  conditions  which  regulate  all  production — that  is, 
by  the  amount  of  space  available,  the  quantity  of  raw  material,  of 
capital  and  labour,  etc.  If  the  growth  of  population  has  not  out- 
stripped the  increase  in  wealth,  but,  as  appears  from  the  figures 
we  have  given,  has  actually  lagged  behind  it,  it  is  because  population 
has  been  voluntarily  limited,  not  only  in  France,  where  the  preven- 
tive check  is  in  full  swing,  but  also  in  almost  every  other  country. 
This  voluntary  limitation  which  gave  Malthus  such  trouble  is  one 
of  the  commonest  phenomena  of  the  present  time. 

Malthus's  apprehensions  appear  to  involve  some  biological  con- 
fusion. The  sexual  and  the  reproductive  instincts  are  by  no  means 
one  and  the  same  ; 1  they  are  governed  by  entirely  different  motives. 
Only  to  the  first  can  be  attributed  that  character  of  irresistibility 
which  he  wrongly  attributes  to  the  second.  The  first  is  a  mere 
animal  instinct  which  rouses  the  most  impetuous  of  passions  and  is 
common  to  all  men.  The  second  is  frequently  social  and  religious 
in  its  origins,  assuming  different  forms  according  to  the  exigencies  of 
time  and  place. 

To  the  religious  peoples  who  adopted  the  laws  of  Moses,  of  Manu, 
or  of  Confucius  to  beget  issue  was  to  ensure  salvation  and  to  realise 
true  immortality.2  For  the  Brahmin,  the  Chinese,  or  the  Jew  not  to 
have  children  meant  not  merely  a  misfortune,  but  a  life  branded  with 
failure.  Among  the  Greeks  and  Romans  the  rearing  of  children  was 
a  sacred  duty  laid  upon  every  citizen  and  patriot.  An  aristocratic 
caste  demanded  that  the  glories  of  its  ancestors  and  founders  should 
never  be  allowed  to  perish  for  the  want  of  heirs.  Even  among  the 
working  classes,  whose  lot  is  often  miserable  and  always  one  of 
economic  dependence,  there  are  some  who  are  buoyed  up  by  the 
hope  that  the  more  children  they  have  the  larger  will  be  their  weekly 
earnings  and  the  greater  their  power  of  enlisting  public  sympathy. 

1  These  differ,  again,  from  the  desire  for  marriage,  which  is  influenced  by  other 
considerations.  French  people  marry  in  order  to  have  a  home,  but  a  desire  for  a 
home  and  a  desire  for  love  or  for  children  are  very  different  things. 

1  "  By  a  son  a  man  obtains  victory  over  all  people  ;  by  a  son's  son  he  enjoya 
immortality ;  and  afterwards  by  the  son  of  that  grandson  he  reaches  the  solar 
abode."  "  The  son  delivers  his  father  from  hell."  "  A  son  of  a  Brahmin  if 
he  performs  virtuous  acts  redeems  from  sin  his  ten  ancestors."  (P.  105.) 

This  is  Manu's  law,  which  Malthus  quotes  in  support  of  his  contention.  But 
he  failed  to  see  that  as  soon  as  one  begins  to  doubt  Manu's  teaching  the  argument 
is  the  other  way.  One  of  the  reasons  why  sterility  was  considered  a  dishonour  by 
Jewish  women  was  that  each  of  them  secretly  hoped  that  she  might  become  the 
mother  of  the  promised  Messiah.  But  when  the  Jews  ceased  to  hope  for  the 
Deliverer  that  was  to  oome,  then  the  incentive  to  childbirth  was  gone. 


MALTHUS  133 

And  in  every  new  country  there  is  a  demand  for  labourers  to 
cultivate  its  virgin  soil  and  to  build  up  a  new  people. 

The  reproductive  instinct,  on  the  other  hand,  may  be  thwarted 
by  antagonistic  forces — by  the  selfishness  of  parents  who  shun  their 
responsibilities,  or  of  mothers  who  dread  the  pains  and  perils  of 
child-bearing ;  by  the  greed  of  parents  who  would  endow  old  age 
rather  than  foster  youth ;  by  the  desire  of  women  to  enjoy  inde- 
pendence rather  than  seek  marriage  ;  by  the  too  early  emancipation 
of  children,  which  leaves  to  the  parents  no  gains  and  no  joys  beyond 
the  cost  and  trouble  of  upbringing ;  by  insufficient  house-room  or 
exorbitant  taxation,  or  by  any  one  of  a  thousand  causes. 

Thus  the  considerations  that  influence  reproduction  are  infinitely 
varied,  and  being  of  a  social  character  they  are  neither  necessary  nor 
permanent,  nor  yet  universal.  They  may  very  well  be  defeated  by 
motives  that  belong  to  the  social  order,  and  this  is  just  what  happens. 
And  it  is  at  least  possible  to  conceive  of  a  state  of  society  where 
religious  faith  has  vanished  and  patriotism  is  dead,  where  the  family 
lasts  only  for  one  generation,  and  where  all  land  has  been  appropriated 
so  that  the  calling  of  the  father  is  denied  to  the  son  ;  where  existence 
has  again  become  nomadic  and  suffering  unbearable,  and  where 
marriage,  easily  annulled  by  divorce,  has  become  more  or  less  of  a 
free  union.  In  such  a  community,  with  all  incentives  to  reproduction 
removed  and  all  antagonistic  forces  in  full  operation,  the  birth-rate 
would  fall  to  zero.  And  if  all  nations  have  not  yet  arrived  at  this 
stage  they  all  seem  to  be  tending  towards  it.  It  is  true  that  a  new 
social  environment  may  give  rise  to  new  motives.  We  believe 
that  it  will,  but  as  yet  we  are  ignorant  of  the  nature  of  these 
promptings. 

Paradoxical  as  it  may  seem,  the  sexual  instinct  plays  quite  a 
secondary  role  in  the  procreation  of  the  human  species.  Nature 
doubtless  has  united  the  two  instincts  by  giving  them  the  same  organs, 
and  those  who  believe  in  final  causes  can  admire  the  ruse  which 
Nature  has  adopted  for  securing  the  preservation  of  the  species  by 
coupling  generation  with  sexual  attraction.  But  man  has  displayed 
ingenuity  even  greater  than  Nature's  by  separating  the  two  functions. 
He  now  finds  that  (since  he  has  known  how  to  get  rid  of  reproduction) 
he  can  gratify  his  lust  without  being  troubled  by  the  consequences. 
The  fears  of  Malthus  have  vanished  :  the  other  spectre,  race  suicide, 
is  new  casting  a  gloom  over  the  land. 

Malthus's  condemnation  of  such  practices  was  of  little  avail. 
Other  moralists  more  indulgent  than  the  master  have  given  them 
their  sanction  by  endeavouring  to  show  that  this  is  the  only  way  in 


184  THE  PESSIMISTS 

which  men  can  perform  a  double  function,  on  the  one  hand  giving 
full  scope  to  sexual  instinct  in  accordance  with  the  physiological  and 
psychological  laws  of  their  being,  and  on  the  other  taking  care  not 
to  leave  such  a  supreme  duty  as  that  of  child-bearing  to  mere  chance 
and  not  to  impose  upon  womankind  such  an  exhausting  task  as 
that  of  maternity  save  when  freely  and  voluntarily  undertaken. 
This  is  quite  contrary  to  the  pastor's  teaching  concerning  moral 
restraint.  The  Neo-Malthusians,  on  the  other  hand,  consider  his 
teaching  very  immoral,  as  being  contrary  to  the  laws  of  physiology, 
infected  with  ideas  of  Christian  asceticism,  and  altogether  worse 
than  the  evil  it  seeks  to  remedy.  His  rule  of  enforced  celibacy 
might,  in  their  opinion,  involve  more  suffering  even  than  want  of 
food,  and  late  marriages  simply  constitute  an  outrage  upon  morality 
by  encouraging  prostitution  and  increasing  the  number  of  illegitimate 
births.  The  Neo-Malthusians  x  persist  in  regarding  themselves  as 
his  disciples  because  they  think  that  he  clearly  demonstrated,  despite 
himself  perhaps,  that  the  exercise  of  the  blind  instinct  of  reproduc- 
tion must  result  in  the  multiplication  of  human  beings  who  are 
faced  by  want  and  disease  and  liable  to  sudden  extinction  or  slow 
degradation,  and  that  the  only  way  of  avoiding  this  is  to  check  the 
instinct. 

There  is  reason  to  believe,  however,  that  were  Malthus  now  alive 
he  would  not  be  a  Neo-Malthusian.  He  would  not  have  willingly 
pardoned  his  disciples  the  perpetration  of  sexual  frauds  which  enable 
man  to  be  freed  from  the  responsibilities  which  Nature  intended 
him  to  bear.  Nevertheless  we  must  recognise  that  the  concessions 
which  he  made  prepared  the  way  for  this  further  development. 

Malthus  did  not  seem  to  realise  the  full  import  of  these  delicate 
questions  which  contributed  so  powerfully  to  the  overthrow  of  his 
doctrine.  Especially  is  this  true  of  the  emphasis  which  he  laid  upon 
chastity,  involving  as  he  thought  abstention  from  the  joys  of  mar- 
riage. Such  celibacy  he  would  impose  only  upon  the  poor.2  The 

1  Neo-Malthusianism  dates  from  the  publication  of  Dr.  Drysdale's  book, 
Elements  of  Social  Science,  in  1854,  but  the  Malthusian  League  came  into 
existence  only  in  1877.  During  the  last  few  years  the  movement  seems  to 
have  taken  hold  everywhere,  especially  in  France,  where  we  would  least  have 
expected  it. 

•  He  categorically  declares  that  "  we  must  suppose  the  general  prevalence 
of  such  prudential  habits  among  the  poor  as  would  prevent  them  from  marrying 
when  the  actual  price  of  labour  joined  to  what  they  might  have  saved  in  their 
single  state  would  not  give  them  the  prospect  of  being  able  to  support  a  wife 
and  five  or  six  children  without  assistance."  (P.  638.)  Marriage  seems  pro- 
hibited to  every  worker  whose  wages  are  not  enough  to  keep  eight  persons, 
which  practically  would  mean  that  no  workman  could  many. 


MALTHUS  185 

rich  are  obviously  so  circumstanced  that  children  cannot  be  a 
hindrance.  We  know  well  enough  that  it  was  in  the  interests  of  the 
poor  themselves  that  Malthus  imposed  his  cruel  law  "  not  to  bring 
beings  into  the  world  for  whom  the  means  of  support  cannot  be 
found."  But  that  does  not  prevent  its  emphasising  in  the  most 
heartless  fashion  imaginable  the  inequality  of  their  conditions,  forcing 
the  poor  to  choose  between  want  of  bread  and  celibacy.  Malthus 
gave  a  quietus  to  the  old  song  which  eulogises  love  in  a  cottage  as  the 
very  acme  of  happiness.  It  is  only  just  to  remark,  however,  that  he 
does  not  go  so  far  as  to  put  an  interdict  upon  marriage  altogether, 
which  is  actually  the  case  in  some  countries.  The  old  liberal  econo- 
mist asserts  himself  here.  He  sees  clearly  enough  that,  leaving  aside 
all  humanitarian  considerations,  the  remedy  offered  would  be  worse 
than  the  evil,  for  its  only  result  would  be  a  diminution  in  the  number 
of  legitimate  children  and  an  increase  in  the  number  of  those  born 
out  of  wedlock.1 

When  telling  the  poor  that  they  themselves  were  the  authors  of 
their  misery,2  because  of  their  improvident  habits,  their  early 
marriages,  and  their  large  families,  and  that  no  written  law,  no 
institution,  and  no  effort  of  charity  could  hi  any  way  remedy  it,  he 
failed  to  realise  that  he  was  furnishing  the  propertied  classes  with  a 
good  pretext  for  dissociating  themselves  from  the  fate  of  the  working 
classes.3  And  during  the  century  which  has  passed  since  he  wrote 

1  "  I  have  been  accused  of  proposing  a  law  to  prohibit  the  poor  from  marrying. 
This  is  not  true.  ...  I  am,  indeed,  most  decidedly  of  opinion  that  any  positive 
law  to  limit  the  age  of  marriage  would  be  both  unjust  and  immoral."  (P.  357.) 

*  It  is  worth  while  recalling  the  passage  to  which  we  have  already  incidentally 
drawn  attention :    "  The  poor  are  themselves  the  cause  of  their  own  poverty." 
(P.  458.) 

*  His  views  concerning  charity  are  exceedingly  interesting,  and  are  directly 
connected  with  his  theory  of  population.     This  was  the  practical  question  about 
which  he  was  most  concerned,  and  his  influence  in  this  direction  has  been  very 
considerable.    He  showed  himself  an  uncompromising  opponent  of  the  English 
Poor  Law  as  it  then  existed.     Speaking  of  the  famous  43rd  of  Elizabeth,  he 
declares  that  one  of  its  clauses  is  "  as  arrogant  and  as  absurd  as  if  it  had  enacted 
that  two  ears  of  wheat  should  in  future  grow  where  one  only  had  grown  before. 
Canute,  when  he  commanded  the  waves  not  to  wet  his  princely  foot,  did  not  in 
reality  assume  a  greater  power  over  the  laws  of  nature."     Since  public  assistance 
cannot  create  wealth,  it  cannot  either  keep  alive  a  single  pauper.     "  It  may 
at  first  appear  strange,  but  I  believe  it  is  true,  that  I  cannot  by  means  of  money 
raise  the  condition  of  a  poor  man  .  .  .  without  proportionally  depressing  others 
in  the  same  class."     But  it  may  be  pointed  out  that  although  charity  cannot 
beget  wealth  it  does  transfer  a  certain  portion  of  wealth  from  the  pockets  of  the 
rich  to  fill  the  mouths  of  the  hungry  poor.    The  consumption  of  the  one  is 
inoreased  just  as  much  as  the  other's  is  decreased. 

Not  only  does  he  condemn  charity  in  the  way  of  almsgiving,  but  also  the 


136  THE  PESSIMISTS 

the  way  to  every  comprehensive  scheme  of  socialistic  or  communistic 
organisation  has  been  barred  and  every  projected  reform  which 
claimed  to  ameliorate  the  condition  of  the  poor  effectively  thwarted 
by  the  argument  that  the  only  result  would  be  to  increase  the 
number  of  participators  as  well  as  the  amount  to  be  distributed, 
and  that  consequently  no  one  would  be  any  the  better  off. 

Whatever  opposition  Malthus's  doctrines  may  have  aroused,  his 
teaching  has  long  since  become  a  part  and  parcel  of  economic  science. 
Occasionally  it  has  thwarted  legitimate  claims,  while  at  other  times 
it  has  been  used  to  buttress  some  well-known  Classical  doctrine,  such 
as  the  law  of  rent  or  the  wages  fund  theory.  On  more  than  one 
occasion  it  has  done  service  in  the  defence  of  family  life  and  private 
property,  two  institutions  which  are  supposed  to  act  as  effective 
checks  upon  the  growth  of  population,  because  of  the  responsibilities 
which  they  involve.1 

practice  of  giving  work  for  charity's  sake.  He  admits  an  exception  in  the 
case  of  education,  of  which  everybody  can  partake  without  making  anyone 
else  the  poorer.  Such  arguments  would  seem  to  imply  the  prohibition  of 
all  charity,  whether  public  or  private,  and  as  a  matter  of  fact  he  demands 
the  gradual  abolition  of  the  Poor  Laws  and  of  every  kind  of  systematic 
assistance  which  offers  to  the  poor  any  kind  of  help  upon  which  they  can 
always  reckon.  But  he  recognises  the  "  good  results  of  private  charity,  dis- 
criminately  and  occasionally  exercised."  Though  he  failed  to  remove  the  Poor 
Laws,  the  effect  of  his  teaching  is  clearly  seen  in  the  Poor  Law  Amendment  Act 
of  1834. 

Malthus's  doctrine  is  just  the  reverse  of  the  social  teaching  on  the  question  in 
France  at  the  present  time.  There  you  have  an  attempt  to  substitute  solidarity  for 
Christian  charity.  That  means  that  the  poor  should  be  able  to  demand  assistance, 
not  as  a  gift,  but  as  a  right,  and  that  the  place  of  individual  or  private  charity 
should  be  taken  by  a  public  institution  with  a  view  to  giving  effect  to  this.  Hia 
teaching  concerning  the  preventive  obstacle  has  been  so  thoroughly  taken  to 
heart  that  there  is  not  much  fear  of  legal  assistance  resulting  in  a  growth  of 
population. 

1  It  is  not  proved,  however,  that  such  were  Malthus's  views.  Private  property, 
at  least  peasant  proprietorship,  acts  as  a  stimulus  to  population.  And  it  is  very 
curious  to  think  that  he  should  have  taken  his  illustration  from  Prance,  where 
the  multiplication  of  small  farms  is  considered  one  of  the  causes  of  the  falling 
birth-rate.  "  At  all  times  the  number  of  small  farmers  and  proprietors  in  France 
was  great,  and  though  such  a  state  of  things  is  by  no  means  favourable  to  the 
clear  surplus  produce  or  disposable  wealth  of  a  nation,  yet  sometimes  it  is  not 
unfavourable  to  the  absolute  produce,  and  it  has  always  a  strong  tendency  to 
encourage  population."  And  again :  "  Even  in  France,  with  all  her  advantages 
of  situation  and  climate,  the  tendency  of  population  is  so  great  and  the  want  of 
foresight  among  the  lower  classes  so  remarkable  .  .  ."  Godwin  and  Young 
express  similar  opinions.  The  latter  is  quoted  by  Malthus  :  "  The  predominant 
evil  of  the  kingdom  is  the  having  so  great  a  population  that  she  can  neither 
employ  nor  feed  it."  (P.  509.) 

Marriage,  Malthus  thought,  had  a  restraining  influence  upon  population.    H* 


MALTHUS  137 

The  population  question  has  lost  none  of  its  importance,  although 
it  has  somewhat  changed  its  aspect.  What  Malthus  called  the 
preventive  check  has  got  such  a  hold  of  almost  every  country  that 
modern  economists  and  sociologists  are  concerned  not  so  much 
with  the  question  of  an  unlimited  growth  of  population  as  with  the 
regular  and  universal  decline  of  the  birth-rate.  Everyone  is  further 
agreed  that  the  causes  must  be  social. 

It  is  not  enough  to  say  that  the  cause  is  a  deliberate  determina- 
tion of  parents  to  have  no  children  or  to  have  only  a  limited  number. 
The  question  is,  Why  do  they  decide  to  have  none  or  to  limit  their 
family  to  a  certain  number  only  ?  Why  is  this  limitation  more 
marked  in  France  than  elsewhere,  and  why  is  it  more  pronounced 
there  to-day  than  it  was  say  two  or  three  generations  ago  ?  The 
special  causes  which  apply  to  the  France  of  to-day  must  somehow 
be  discovered,  and  such  causes  may  be  expected  to  be  less  active 
elsewhere.  It  may  be  that  Paul  Leroy-Beaulieu  is  right  when  he 
claims  that  the  progress  of  civilisation  must  always  mean  a  declining 
birth-rate,  because  the  fresh  needs  and  desires  and  the  extra  expendi- 
ture which  it  necessarily  involves  are  incompatible  with  the  duties 
and  responsibilities  of  maternity.  It  is  possible  that  it  diminishes 
as  democracy  advances,  because  the  latter  strengthens  the  tele- 
scopic faculty  and  quickens  the  desire  to  rise  in  the  social  scale  as 
rapidly  and  as  effectively  as  possible.  M.  Dumont,  who  advocates 
this  view,  has  happily  named  it  the  law  of  capillarity.  More 
precise  causes  are  sometimes  invoked,  but  they  vary  according 
to  the  particular  school  that  formulates  them.  Le  Play  thinks 
that  it  is  due  to  the  practice  of  social  inheritance.  Paul  Bureau 
takes  it  as  a  sign  of  the  weakening  of  moral  and  religious  belief,  and 
of  the  growth  of  intemperate  habits  of  every  kind — alcoholism, 
debauchery,  etc.  Unfortunately  none  of  the  explanations  given  seem 
quite  satisfactory,  and  a  second  Malthus  is  required  to  open  up  a  new 
chapter  in  the  history  of  demography.  * 

admits  that  the  simplest  and  most  natural  obstacle  is  to  oblige  every  father 
to  rear  his  own  children.  He  also  admits  that  the  shame  which  the  mother  of 
a  bastard  and  her  child  have  to  endure  is  a  matter  of  social  necessity.  He  does 
not  approve  of  forcing  the  man  who  has  betrayed  a  woman  to  many,  but  he 
declares  that  seduction  ought  to  be  seriously  punished.  This  is  the  view 
commonly  adopted  to-day,  but  it  was  very  novel  then. 

1  There  are  some  sociologists  who,  like  Malthus,  would  seek  an  explanation 
both  of  depopulation  and  of  over -population  in  biological  causes.  Fourier  and 
Doubleday,  for  example,  are  among  the  number.  Doubleday,  who  wrote  forty 
years  before  Malthus,  believed  that  fecundity  varied  inversely  with  subsistence, 
and  that  this  acted  as  a  kind  of  natural  check  upon  the  growth  of  population. 
There  are  others,  again,  who  think  that  reproductive  capacity  varies  inversely 


THE  PESSIMISTS 


II  :  RICARDO 

NEXT  to  Smith,  Ricardo  is  the  greatest  name  in  economics,  and 
fiercer  controversy  has  centred  round  his  name  than  ever  raged 
around  the  master's.  Smith  founded  no  school,  and  his  wisdom  and 
moderation  saved  him  from  controversy.  Hence  every  economist, 
whatever  his  views,  is  found  sitting  at  his  feet  straining  to  catch  the 
divine  accents  as  they  fall  from  his  lips. 

But  Ricardo  was  no  dweller  in  ethereal  regions.  He  was  in  the 
thickest  of  the  fight  —  the  butt  of  every  shaft.  In  discussions  on  the 
question  of  method  the  attack  is  always  directed  against  Ricardo, 
who  is  charged  with  being  the  first  to  lead  the  science  into  the  fruitless 
paths  of  abstraction.  The  Ricardian  theory  of  rent  affords  a  target 
for  every  Marxian  in  his  general  attack  upon  private  property.  The 
Ricardian  theory  of  value  is  the  starting-point  of  modern  socialism  — 
a  kinship  that  he  could  never  have  disavowed,  however  little  to  his 
taste.  The  same  thing  is  true  of  controversies  concerning  banks 
of  issue  and  international  trade  :  Ricardo's  place  was  ever  with 
the  vanguard. 

His  defects  are  as  interesting  as  his  merits,  and  have  been  equally 
influential.  Of  his  theories,  especially  his  more  characteristic  ones, 
there  is  now  little  left,  unless  we  recall  what  is  after  all  quite  as  im- 
portant —  the  criticisms  they  aroused  and  the  adverse  theories  which 
they  begot.  The  city  banker  was  a  very  indifferent  writer,  and  his 
work  is  adorned  with  none  of  those  beautiful  passages  so  charac- 
teristic of  Smith  and  Stuart  Mill.  No  telling  phrase  or  striking 
epithet  ever  meets  the  eye  of  the  reader.  His  principal  work  is 
devoid  of  a  plan,  its  chapters  being  mere  fragments  placed  in 
juxtaposition.  His  use  of  the  hypothetical  method  and  the  con- 
stant appeal  to  imaginary  conditions  makes  its  reading  a  task  of 
some  difficulty.  This  abstract  method  has  long  held  dominion  over 
the  science,  and  it  is  still  in  full  activity  among  the  Mathematical 
economists.  His  thoughts  are  penetrating,  but  his  exposition  is 
frequently  obscure,  and  a  remark  which  he  makes  somewhere  in 
speaking  of  other  writers,  namely,  that  they  seldom  know  their  own 
strength,  may  very  appropriately  be  applied  to  him.  But  obscurity 

with  intellectual  activity.  Both  explanations  seem  to  suggest  a  kind  of  oppo- 
sition between  the  development  of  the  individual  and  the  progress  of  the  race 
which  is  very  suggestive.  But  their  views  have  not  gained  many  adherents. 
If  they  are  ever  proved,  which  is  not  very  likely,  the  prospect  is  not  an  attractive 
one.  It  would  mean  that  those  nations  and  classes  who  have  risen  to  a  position 
of  ease  through  their  superior  culture  would  disappear,  while  the  poorer,  uncul- 
tured masses  would  continue  to  incr.aio. 


RlCARDO  189 

of  style  has  not  clouded  his  fame.  Indeed,  it  has  stood  him  in  good 
stead,  as  it  did  Marx  at  a  later  date.  We  hardly  like  to  say  that  a 
great  writer  is  unintelligible — a  feeling  prompted  partly  by  respect 
and  partly  arising  out  of  fear  lest  the  lack  of  intelligence  should  really 
be  on  our  side.  The  result  is  an  attempt  to  discover  a  profound 
meaning  in  the  most  abstruse  passage — an  attempt  that  is  seldom 
fruitful,  especially  in  the  case  of  Ricardo. 

It  is  clearly  impossible  to  outline  the  whole  of  this  monumental 
work.  We  shall  content  ourselves  with  an  attempt  to  place  the 
leading  conceptions  clearly  before  our  readers.1 

Speaking  generally,  Ricardo's  chief  concern  is  with  the  distribu- 
tion of  wealth.  He  was  thus  instrumental  in  opening  up  a  new 
field  of  economic  inquiry,  for  his  predecessors  had  been  largely 
engrossed  with  production.  "  To  determine  the  laws  which  regulate 

1  David  Ricardo  was  descended  from  a  Jewish  family  originally  domiciled  in 
Holland.  He  was  born  in  1772  in  London,  where  his  father  had  settled  as  a  stock- 
broker. He  entered  business  at  an  early  age,  and  soon  became  thoroughly  con- 
versant with  the  intricacies  of  banking  and  exchange.  On  the  occasion  of  his 
marriage  he  changed  his  religion,  and  thus  incurred  the  displeasure  of  his 
family.  Setting  up  as  a  broker  on  his  own  account,  he  was  not  long  in  amassing 
a  huge  fortune,  estimated  at  about  £2,000,000 — an  enormous  sum  for  those 
days. 

Naturally  enough,  his  earliest  interest  in  economics  centred  round  banking 
questions.  The  French  wars  had  caused  a  depreciation  in  the  value  of  the 
bank-note,  and  this  aroused  the  interest  not  only  of  the  specialists,  but  also  of 
the  public.  His  first  essay,  published  in  1810,  when  he  was  thirty-eight  years  of 
age,  was  entitled  The  High  Price  of  Bullion  a  Proof  of  the  Depreciation  of  Bank- 
notes. It  was  soon  followed  by  other  studies  dealing  with  banks  and  with  the 
credit  system.  But  these  short  polemical  efforts  gave  scarcely  any  indication 
of  the  great  attention  which  he  was  bestowing  upon  the  principles  of  the  science. 
His  interest  was  primarily  personal,  for  it  appears  that  he  had  no  intention 
of  publishing  anything  on  the  subject.  In  1817,  however,  the  results  were  seen 
in  a  volume  entitled  The  Principles  of  Political  Economy.  Ricardo  the  business 
man  could  hardly  have  guessed  that  it  would  shake  the  capitalistic  edifice  to 
its  very  foundations. 

In  1819  he  was  elected  a  member  of  the  House  of  Commons,  but  he  was  as 
indifferent  a  speaker  as  he  was  a  writer.  He  was  always  listened  to,  however,  with 
the  greatest  respect.  "  I  have  twice  attempted  to  speak,"  he  writes,  "  but  I 
proceeded  in  the  most  embarrassed  manner :  and  I  have  no  hope  of  conquering 
the  alarm  with  which  I  am  assailed  the  moment  I  hear  the  Bound  of  my  own 
voice."  In  1821  he  founded  the  Political  Economy  Club,  the  earliest  of  those 
numerous  societies  for  the  study  of  economic  subjects  which  have  since  been 
established  in  every  country.  In  1822  he  published  a  work  on  Protection  to  Agri- 
culture. The  following  year  he  died,  at  the  comparatively  early  age  of  fifty-one. 

Since  his  death  all  his  writings  have  been  carefully  collected,  and  his  corre- 
spondence with  the  chief  economists  of  his  day,  with  Malthus,  McCulloch,  and 
Say,  published.  The  correspondence  is  extremely  important  for  an  understanding 
of  his  doctrinea. 


140  THE  PESSIMISTS 

this  distribution  is  the  principal  problem  in  political  economy." 
We  have  already  some  acquaintance  with  the  tripartite  division  of 
revenues  corresponding  with  the  threefold  division  of  the  factors  of 
production — the  rent  of  land,  the  profits  of  capital,  and  the  wages 
of  labour.  Ricardo  wanted  to  determine  the  way  in  which  this 
division  took  place  and  what  laws  regulated  the  proportion  which 
each  claimant  got.  Although  unhampered  by  any  preconceptions 
concerning  the  justice  or  injustice  of  distribution,  we  can  easily 
understand  how  he  ushered  in  the  era  of  polemics  and  of  socialistic 
discussion,  seeing  that  the  natural  laws  pale  into  insignificance 
when  contrasted  with  the  influence  wielded  by  human  institutions 
and  written  laws.  The  latter  override  the  former,  and  individual 
interests  which  may  co-operate  in  production  frequently  prove 
antagonistic  in  distribution. 

We  shall  follow  him  in  his  exposition  of  the  laws  of  rent,  wages, 
and  profits,  but  especially  rent,  for  according  to  him  the  share  given 
to  land  determines  the  proportions  which  the  other  factors  are  going 
to  receive. 

One  would  imagine  that  an  indispensable  preliminary  to  this  study 
would  be  an  examination  of  the  Ricardian  theory  of  value,  especially 
when  we  recall  the  importance  of  his  theory  of  labour-value  in  the 
history  of  economics  doctrine  and  how  it  prepared  the  way  for  the 
Marxian  theory  of  surplus  value,  which  is  the  foundation-stone  of 
contemporary  socialism.  Despite  all  this  we  shall  only  refer  to  his 
theory  of  value  incidentally,  and  chiefly  in  connection  with  the  laws  of 
distribution.  We  have  Ricardo's  own  authority  for  doing  this : 
"  After  all,  the  great  problem  of  rent,  of  wages,  or  of  profits  might 
be  elucidated  by  determining  the  proportions  in  which  the  total 
product  is  distributed  between  the  proprietors,  the  capitalists,  and  the 
workers,  but  this  is  not  necessarily  connected  with  the  doctrine  of 
value."  * 

It  is,  moreover,  probable  that  Ricardo  himself  did  not  begin  with 
an  elaborate  theory  of  value  from  which  he  deduced  the  laws  of 
distribution,  but  after  having  discovered,  or  having  convinced 
himself  that  he  had  discovered,  the  laws  of  distribution  he  attempted 
to  deduce  from  them  a  theory  of  value.  One  idea  had  haunted 
him  his  whole  life  long,  namely,  that  with  the  progress  of  time  nature 
demanded  an  ever-increasing  application  of  human  toil.  No  doubt 
it  was  this  that  suggested  to  him  that  labour  was  the  foundation, 
the  cause,  and  the  measure  of  value.  But  he  never  came  to  a  final 
decision  on  the  question,  and  his  statements  concerning  it  are  fre- 

»  Letter  to  McCulIoch,  July  13,  1820,  quoted  by  H.  Denis,  vol.  ii,  p.  171. 


RlCARDO  141 

quently  contradictory.  We  must  also  confess  that  his  theory  of  value 
is  far  from  being  his  most  characteristic  work.  In  the  elucidation  of 
that  difficult  question,  vigorous  thinker  though  he  was,  he  has  not 
been  much  more  fortunate  than  his  predecessors.  He  himself 
acknowledged  this  on  more  than  one  occasion,  and  shortly  before  his 
death,  with  a  candour  that  does  him  honour,  he  recognised  his 
failure  to  explain  value.1 

1.  THE  LAW  OF  RENT 

Of  all  Ricardian  theories  that  of  rent  is  the  most  celebrated,  and 
it  is  also  the  one  most  inseparably  connected  with  Ricardo's  name. 
So  well  known  is  it  that  Stuart  Mill  spoke  of  it  as  the  economic  pons 
asinorum,  and  it  has  always  been  one  of  the  favourite  subjects  of 
examiners. 

The  question  of  rent — that  is,  of  the  return  which  land  yields — 
had  occupied  the  attention  of  others  besides  Ricardo.  It  was  the 
burning  question  of  the  day.  The  problem  of  rent  dominated 
English  political  economy  during  the  first  half  of  the  nineteenth 
century,  and  a  later  period  has  witnessed  a  revival  of  it  in  the  land 
nationalisation  policy  of  Henry  George.  In  France  there  was  but 
a  feeble  echo  of  the  controversy,  for  France  even  long  before  the 
Revolution  had  been  a  country  of  small  proprietors.  Landlordism 
was  far  less  common  there,  and  where  it  existed  its  characteristics 
were  very  different.  That  threefold  hierarchy  which  consisted  of 
a  worker  toiling  for  a  daily  wage  in  the  employ  of  a  capitalist  farmer 
who  draws  his  profits  towered  over  by  a  landlord  in  receipt  of  rents 
formed  a  kind  of  microcosmic  picture  of  the  universal  process  of 
distribution,  but  it  was  seldom  as  clearly  seen  in  France  as  it  was 
in  England. 

The  first  two  incomes  presented  no  difficulties.  But  how  are  we 
to  explain  that  other  income — that  revenue  which  had  created  English 
aristocracy  and  made  English  history  ?  The  Physiocrats  had  named 
it  the  "  net  product,"  and  they  argued  a  liberality  of  nature  and  a 
gift  of  God.  Adam  Smith,  although  withholding  the  title  of  creator 
from  nature  and  bestowing  it  upon  labour,  nevertheless  admits  that 

1  In  his  correspondence  with  McCulloch,  under  date  December  18,  1819,  he 
writes :  "  I  am  not  satisfied  with  the  explanation  which  I  have  given  of  the 
principles  which  regulate  value.  I  wish  a  more  able  pen  would  undertake  it." 

In  a  letter  to  Malthua  written  on  August  15,  1820,  speaking  of  his  own 
theory  of  value  and  of  McCulloch's,  he  despairingly  adds :  "  Both  of  us 
have  failed."  See  Halevy,  Le  Eadicalisme  philosophique,  and  Hector  Denis, 
op.  cit. 


142  THE  PESSIMISTS 

a  notable  portion — perhaps  as  much  as  a  third  of  the  revenue  of  land 
— is  due  to  the  collaboration  of  nature.1 

Malthus  had  already  produced  a  book  on  the  subject,1  and 
Ricardo  hails  him  as  the  discoverer  of  the  true  doctrine  of  rent. 
Malthus  takes  as  his  starting-point  the  explanation  offered  by  the 
Physiocrats  and  Adam  Smith,  namely,  that  rent  is  the  natural 
outcome  of  some  special  feature  possessed  by  the  earth  and  given  it 
by  God — that  is,  the  power  of  enabling  more  people  to  live  on  it 
than  are  required  to  till  it.  Rent  is  the  result,  not  of  a  merely  physical 
law,  but  also  of  an  economic  one,  for  nature  seems  to  have  a  unique 
power  of  creating  a  demand  for  its  products,  and  consequently  of 
maintaining  and  even  of  increasing  indefinitely  both  its  own  revenue 
and  value.  The  reason  for  this  is  that  the  population  always  tends 
to  equal  and  sometimes  to  surpass  the  means  of  subsistence.  In 
other  words,  the  number  of  people  born  is  seldom  less  than  the 
maximum  number  that  the  earth  can  feed.  This  new  theory  of 
rent  is  a  simple  deduction  from  Malthus's  law  concerning  the  constant 
pressure  of  population  upon  the  means  of  subsistence. 

Malthus  emphasised  another  important  feature  of  rent,  and  it  was 
this  characteristic  that  especially  attracted  Ricardo.  Seeing  that 
different  parts  pf  the  earth  are  of  unequal  fertility,  the  capitals  em- 
ployed in  cultivation  must  of  necessity  yield  unequal  profits.  The 
difference  between  the  normal  rate  of  profit  on  mediocre  lands  and 
the  superior  rate  yielded  by  the  more  fertile  land  constitutes  a  special 
kind  of  profit  which  is  immediately  seized  by  the  owner  of  the  more 
fertile  land.  This  extra  profit  r afterwards  became  known  as  dif- 
ferential rent. 

To  Malthus,  as  well  as  to  the  Physiocrats,  this  kind  of  rent  seemed 
perfectly  legitimate  and  conformed  to  the  best  interests  of  the  public. 
It  was  only  the  just  recompense  for  the  "  strength  and  talent " 
exercised  by  the  original  proprietors.  The  same  argument  applies 
to  those  who  have  since  bought  the  land,  for  it  must  have  been 
bought  with  the  "  fruits  of  industry  and  talent."  Its  benefits 
are  permanent  and  independent  of  the  proprietor's  labour,  and  in 
this  way  the  possession  of  land  becomes  a  much-coveted  prize,  the 
otium  cum  dignitate  which  is  the  just  reward  of  meritorious  effort. 

Ricardo  enters  upon  an  entirely  new  track.  He  breaks  the 
connection  with  Smith  and  the  Physiocrats — a  connection  that 
Malthus  had  been  most  anxious  to  maintain.  All  suggestion  of 

1  Smith  had  likened  industry  to  a  household  with  two  children — wages  and 
profits  ;  agriculture  to  a  household  with  three — wages,  profits,  and  rent. 
*  An  Inquiry  into  the  Nature  ana  Progress  of  Rent  (1815). 


RICARDO  148 

co-operation  on  the  part  of  nature  is  brushed  aside  with  contempt. 
Business-man  and  owner  of  property  as  he  was,  he  had  no  super- 
stitious views  concerning  nature,  whose  work  he  contemplated 
without  much  feeling  of  reverence.  As  against  the  celebrated  phrase 
of  Adam  Smith  he  quotes  that  of  Buchanan :  "  The  notion  of 
agriculture  yielding  a  produce  and  a  rent  in  consequence  because 
nature  concurs  with  human  industry  in  the  process  of  cultivation 
is  a  mere  fancy."  l  He  proceeds  to  defend  the  converse  of  Smith's 
view  and  to  show  how  rent  implies  the  avarice  rather  than  the 
liberality  of  nature. 

The  proof  that  the  earth's  fertility,  taken  by  itself,  can  never- 
be  the  cause  of  rent  is  easily  seen  in  the  case  of  a  new  country.  In 
a  newly  founded  colony,  for  example,  land  yields  no  rent,  however 
fertile,  if  the  quantity  of  land  is  in  excess  of  the  people's  demand. 
"  For  no  one  would  pay  for  the  use  of  land  when  there  was  an  abun- 
dant quantity  not  yet  appropriated,  and  therefore  at  the  disposal  of 
whosoever  might  choose  to  cultivate  it."  2  Rent  only  appears  "  when 
the  progress  of  population  calls  into  cultivation  land  of  an  inferior 
quality  or  less  advantageously  situated."  Here  we  have  the  very 
kernel  of  Ricardo's  theory.  Instead  of  being  an  indication  of 
nature's  generosity,  rent  is  the  result  of  the  grievous  necessity  of 
having  recourse  to  relatively  poor  land  under  the  pressure  of  popula- 
tion and  want.3  "  Rent  is  a  creation  of  value,  not  of  wealth,"  says 
Ricardo — a  profound  saying,  and  one  that  has  illuminated  many  a 
mystery  attaching  to  the  theory  of  rent.  In  that  sentence  he 

1  It  is  necessary  to  remember,  however,  that  the  old  theory  survived  and 
appears  here  under  the  very  name  of  Ricardo,  for  he  was  unsuccessful  in  freeing 
himself  altogether  from  its  influence.  He  defines  rent  as  "  that  portion  of  the 
produce  of  the  earth  which  is  paid  to  the  landlord  for  the  use  of  the  original  and 
indestructible  powers  of  the  soil."  He  continually  refers  to  these  powers  of  the 
soil,  which  are  described  as  "  natural,"  "  primitive,"  "  indestructible,"  i.e.  as 
independent  of  all  labour. 

1  "  Nothing  is  more  common  than  to  hear  of  the  advantages  which  the  land 
possesses  over  every  other  source  of  useful  produce  on  account  of  the  surplus 
which  it  yields  in  the  form  of  rent.  Yet  when  land  is  most  abundant,  when  most 
productive  and  most  fertile,  it  yields  no  rent,  and  it  is  only  when  its  powers 
decay  .  .  .  that  rent  appears."  (Principles,  ed.  Conner,  p.  52.) 

•  "  The  labour  of  Nature  is  paid,  not  because  she  does  much,  but  because 
she  does  little.  In  proportion  as  she  becomes  niggardly  in  her  gifts  she  exacts  a 
greater  price  for  her  work."  (Ibid.,  p.  63,  note.) 

"  The  comparative  scarcity  of  the  most  fertile  lands  is  the  cause  of  rent." 
(Ibid.,  p.  395.) 

Adam  Smith  had  already  offered  this  as  an  explanation  in  the  case  of  the 
products  of  the  mine,  but  he  failed  to  see  that  arable  land  is  really  nothing  but  a 
sort  of  mine. 


144  THE  PESSIMISTS 

draws  a  distinction  between  wealth  born  of  abundance  and  satisfac- 
tion and  value  begotten  of  difficulty  and  effort,  and  he  declares 
that  rent  is  of  the  second  category  and  not  of  the  first. 

Still,  this  cannot  be  accepted  as  the  final  explanation.  It  is 
difficult  to  understand  how  a  purely  negative  condition  such  as  the 
absence  of  fertile  land  could  ever  create  a  revenue.  It  were  better 
to  say  that  the  want  of  suitable  land  supplies  the  occasion  for  the 
appearance  of  rent,  although  it  is  not  its  cause.  The  cause  is  the 
high  price  of  agricultural  products — say  corn — due  to  the  increased 
difficulty  of  cultivating  the  less  fertile  lands.1  In  short,  the  cause 
and  the  measure  of  the  rent  of  corn-land  are  determined  by  the 
quantity  of  labour  necessary  to  produce  corn  under  the  most  un- 
favourable circumstances,  "  meaning  by  the  most  unfavourable 
circumstances  the  most  unfavourable  under  which  the  quantity  of 
produce  required  renders  it  necessary  to  carry  on  production."  2 

Let  us  assume,  as  Ricardo  did,  that  first-class  land  yields  a  bushel 
of  corn  as  the  result  of  ten  hours'  work,  the  corn  selling  for  ten 
shillings  a  bushel.8  In  order  to  supply  a  population  that  is  increasing 
in  accordance  with  the  Malthusian  formula,  land  of  the  second  class 
has  to  be  cultivated,  when  the  production  of  a  bushel  requires 
fifteen  hours'  work.  The  value  of  corn  will  rise  proportionately  to 
fifteen  shillings,  and  landed  proprietors  of  the  first  class  will  draw 
a  surplus  value  or  a  bonus  of  five  shillings  per  bushel.  So  rent 
emerges.  Presently  the  time  for  cultivating  lands  of  the  third 
class  will  approach,  when  twenty  hours'  labour  will  be  necessary  for 
the  production  of  a  bushel.  The  price  of  corn  goes  up  to  twenty 
shillings,  and  proprietors  of  the  first  class  see  their  gift  increased  or 
their  rent  raised  from  five  to  ten  shillings  per  bushel,  while  the  owners 
of  the  second-class  land  obtain  a  bonus  of  five  shillings  per  bushel. 
This  marks  the  advent  of  a  new  class  of  rent- receivers,  who  modestly 
take  their  place  a  little  below  the  first  class.  The  third  class  of  land- 
owner will  receive  a  rent  whenever  the  cultivation  of  fourth-class  land 
becomes  a  necessity.4 

1  To-day  we  simply  say  that  it  is  determined  by  increased  demand.  But 
this  is  quite  contrary  to  Ricardo's  views,  for  in  his  opinion  it  is  labour  and  not 
demand  that  creates  value. 

*  "  The  value  of  corn  is  regulated  by  the  quantity  of  labour  bestowed  on  its 
production  on  that  quality  of  land  [or  with  that  portion  of  capital]  which  pays  no 
rent."  (Principles,  ed.  Gonner,  p.  51.) 

1  The  illustration  as  given  by  Ricardo  is  somewhat  more  complicated. 

4  "  When  land  of  an  inferior  quality  is  taken  into  cultivation  the  exchange- 
able value  of  raw  produce  will  rise  because  more  labour  is  required  to  produce  it." 
(Ibid.,  p.  49.) 


RiCARDO  145 

It  has  been  said  in  criticism  of  the  theory  that  the  hierarchy  of 
lands  has  simply  been  invented  for  the  purpose  of  illustrating  the 
theory.  But  what  Ricardo  has  really  done  is  to  put  in  scientific 
language  what  every  peasant  knows — what  has  been  handed  down  to 
him  from  father  to  son  in  unbroken  succession,  namely,  that  all  land 
is  not  equally  fertile. 

Ricardo,  so  often  represented  as  a  purely  abstract  thinker,  was 
in  reality  a  very  practical  man  and  a  close  observer  of  those  facts  that 
were  then  occupying  the  attention  of  both  public  and  Parliament. 
High  rents,  following  upon  high  prices,  constituted  the  most  important 
phenomenon  in  the  economic  history  of  England  towards  the  end 
of  the  eighteenth  and  the  beginning  of  the  nineteenth  centuries. 
Right  through  the  eighteenth  century — that  is,  up  to  1794 — the 
highest  price  paid  for  corn  was  only  a  few  pence  above  60s.  per 
quarter.  But  in  1796  the  price  rose  to  92s.,  and  in  1801  it  reached 
177s. — nearly  three  times  the  old  price.  The  exceptionally  high 
price,  due  to  extraordinary  causes,  chief  among  them  being  the 
Napoleonic  wars  and  the  Continental  blockade,  could  not  last  long, 
although  the  average  during  the  years  1810-13  remained  as  high 
as  106s:1 

This  high  price  of  corn  was  not  entirely  due  to  accidental  causes. 
Something  must  be  attributed  to  the  fact  that  the  available  land  was 
insufficient  for  the  upkeep  of  the  population,  and  that  new  land 
had  to  be  cultivated  irrespective  of  situation  or  degree  of  fertility. 
The  pastures  which  had  formerly  covered  England  were  daily  dis- 
appearing before  the  plough.  It  was  the  period  of  the  iniquitous 
Enclosure  Acts,  when  landlords  set  their  hearts  upon  enclosing  the 
common  lands.  Professor  Cannan  has  drawn  up  an  interesting 
chart  to  show  the  close  correspondence  between  the  progress  of  the 
enclosure  movement  and  the  high  price  of  corn.2 

1  See  Carman's  delightful  volume  The  Theories  of  Production  and  Distribution, 
p.  150,  where  the  average  decennial  price  works  out  as  follows  : 

s.    d. 
1770-1779  45     0 


1780-1789 
1790-1799 
1800-1809 
1810-1813 


45     9 

55  11 

82     2 

106     2 


1  The  number  of  Enclosure  Acts  which  Parliament,  acting  with  the  sanction 
of  public  opinion,  passed  during  the  latter  part  of  the  eighteenth  and  the  beginning 
of  the  nineteenth  centuries  increased  very  rapidly.  Between  1700  and  1845  no 
fewer  than  3835  such  Acts  were  passed,  involving  the  enclosure  of  7,622,664  acres, 
most  of  it.  common  land.  Not  until  1845  do  we  find  a  change  either  in  the  attitude 
of  public  opinion  or  in  the  action  of  Parliament. 


146  THE  PESSIMISTS 

In  1813  a  Commission  appointed  by  the  House  of  Commons  to 
inquire  into  the  price  of  corn — for  the  proprietors  dreaded  the  day 
when  the  return  of  peace  would  allow  of  importation — came  to  the 
conclusion  that  new  lands  could  not  produce  corn  at  a  less  cost  than 
80s.  a  quarter.  What  an  argument  for  Ricardo's  theory  !  l 

But  is  there  no  possible  means  of  avoiding  the  cultivation  of  lands 
of  the  second  and  third  order  ?  Intensive  cultivation  might  doubt- 
less do  something  to  swell  the  returns  on  the  older  lands,  but  only 
up  to  a  certain  point.  It  would  be  absurd  to  imagine  that  on  a 
limited  area  of  land  an  unlimited  quantity  of  subsistence  can  be  pro- 
duced. There  must  be  a  limit  somewhere — an  elastic  limit  perhaps, 
and  one  which  the  progress  of  science  will  push  farther  and  farther 
away,  even  beyond  our  wildest  hopes.  But  the  cultivator  stops 
long  before  this  ideal  limit  is  reached,  for  practice  has  taught  him 
that  the  game  is  not  worth  the  candle,  because  the  outlay  of  capital 
and  labour  exceeds  the  profits  on  the  return.  This  practical  limit 
is  determined  for  him  by  the  law  of  diminishing  returns.2 

That  law  is  indispensable  to  an  understanding  of  the  Ricardian 
theory,  and  is  implied  in  Malthus's  theory  of  population.  Its  discovery 
is  still  earlier,  and  we  have  an  admirable  statement  of  it  in  Turgot's 
writings  :  "It  can  never  be  imagined  that  a  doubling  of  expenditure 
would  result  in  doubling  the  product."  Malthus,  unconsciously  no 
doubt,  repeated  Turgot's  dictum.8  It  is  evident,  says  he,  that 

1  It  is  not  quite  clear  whether  the  high  price  of  corn  is  due  to  the  cultivation  of 
new  lands  or  whether  this  high  price  is  the  cause  of  the  cultivation  of  new  lands. 
The  second  interpretation  appears  to  us  to  be  the  most  natural,  but  it  involves 
the  abandonment  of  the  Ricardian  theory. 

1  Some  critics,  e.g.  Fontenay,  Bastiat's  disciple,  suggested  that  land  No.  4 
might  very  well  become  No.  1,  if,  instead  of  being  employed  in  the  cultivation 
of  corn,  an  intelligent  husbandman  were  to  put  it  to  viticulture  or  rose-growing. 
But  this  is  to  beg  the  question.  The  law  of  rent  implies  products  of  the  same 
kind,  for  it  is  this  identity  of  quality  that  enables  them  to  be  sold  at  the  same 
price.  If  bad  corn-land  could  become  good  rose-growing  ground,  then  of  course  it 
would  take  its  place  among  rose-growing  areas,  yielding  rent  as  soon  as  less  fertile 
lands  were  employed  for  the  same  purpose. 

1  Turgot,  Observation*  sur  un  M emoire  de  M.  de  Saint-Peravy  ((Euvres,  vol.  i, 
p.  420).  "  It  can  never  be  imagined  that  a  doubling  of  expenditure  would  result 
in  doubling  the  product.  ...  It  is  more  than  probable  that  by  gradually  in- 
creasing the  expenditure  up  to  the  point  where  nothing  would  be  gained  on  the 
return,  such  items  would  successively  become  less  fruitful.  The  earth's  fertility 
resembles  a  spring  that  is  being  pressed  downwards  by  the  addition  of  successive 
weights.  If  the  weight  is  small  and  the  spring  not  very  flexible,  the  first  attempts 
will  leave  no  results.  But  when  the  weight  is  enough  to  overcome  the  first 
resistance  then  it  will  giye  to  the  pressure.  After  yielding  a  certain  amount  it  will 
again  begin  to  resist  the  extra  force  put  upon  it,  and  weights  that  formerly  would 


RlCARDO  147 

as  cultivation  extends,  the  annual  addition  made  to  the  average 
product  must  continually  diminish.1  Ricardo  witnessed  the  operation 
of  the  law  under  his  very  eyes,  and  he  frequently  hinted  at  the  decreas- 
ing returns  yielded  by  capital  successively  applied  to  the  same  land. 
Even  in  cases  of  that  kind,  where  recourse  to  new  lands  was  impos- 
sible, rents  were  bound  to  increase. 

Taking  again  land  No.  1,  which  yields  corn  at  10s.  a  bushel,  let 
us  imagine  that  there  .is  an  increased  demand  for  wheat.  Instead  of 
breaking  up  land  No.  2  an  attempt  might  be  made  to  increase  the 
yield  on  No.  1,  but  nothing  will  be  gained  by  it  because  the  new 
bushel  produced  on  No.  1  will  cost  15s.,  which  is  just  what  it  would 
cost  if  raised  on  second-class  land.  Furthermore,  the  price  will  now 
rise  to  15s.,  and  the  two  bushels  will  be  disposed  of  for  80s.,  thus 
giving  the  proprietor  a  rent  of  5s.,  because  they  have  only  cost  25s. 
to  produce.2 

There  is  still  another  possibility,  however.  Resort  might  be  had 
to  emigration  and  colonists  might  be  encouraged  to  cultivate  the 

have  caused  a  depression  of  an  inch  or  more  will  now  scarcely  move  it  by  a  hair's 
breadth.  And  so  the  efiect  of  additional  weights  will  gradually  diminish. 

"  The  comparison  is  not  very  exact,  but  it  is  near  enough  to  enable  us  to 
understand  that  when  the  earth  is  producing  nearly  all  it  can,  a  great  deal  of 
expense  is  necessary  to  obtain  very  little  more  produo.e." 

Turgot,  with  his  usual  perspicacity,  has  noted  a  fact  which  the  Classical  writers 
generally  failed  to  perceive,  namely,  that  at  the  beginning  of  the  process  of 
cultivation  there  may  be  a  period  when  the  return  shows  no  signs  of  diminishing. 

1  We  must  note  the  fact  that  the  law  of  diminishing  returns  was  already 
implied  in  the  second  of  the  famous  progressions  given  by  Malthus,  for  an  arith- 
metical progression  that  shows  an  increase  of  one  every  twenty-five  years 
implies  an  addition  slower  than  the  growth  of  the  series  itself,  i.e.  slower  than 
the  movement  of  time.  Let  us  take  land  that  yields  one ;  in  twenty -five  years  it 
will  yield  two,  an  increase  of  100  per  cent.  But  this  is  only  the  first  step.  At  the 
end  of  another  twenty -five  years  it  will  yield  three,  the  increase  being  always  one. 
But  the  increase  from  two  to  three  means  an  increase  of  only  50  per  cent.,  from 
three  to  four  of  only  33  per  cent.,  and  so  on  to  25  per  cent,  and  20  per  cent.  When 
the  hundredth  place  has  been  reached,  the  increase  will  only  be  1  per  cent.,  and 
it  will  continue  to  fall  farther,  only  more  slowly. 

1  Ricardo  gives  a  slightly  different  explanation.  "  If  with  a  capital  of  £1000 
a  tenant  obtains  100  quarters  of  wheat  from  his  land,  and  by  the  employment  of 
a  second  capital  of  £1000  he  obtains  a  further  return  of  eighty -five,  his  landlord 
would  have  the  power  at  the  expiration  of  his  lease  of  obliging  him  to  pay  fifteen 
quarters,  or  an  equivalent  value  for  additional  rent,  for  there  cannot  be  two  rates 
of  profit."  (Principles,  ed.  Conner,  p.  48.)  He  means  to  say  that  if  profits  fall 
because  new  capital  is  less  productive  than  old,  rent  must  necessarily  appear, 
because  by  definition  rent  is  what  remains  of  the  produce  after  deducting  profits 
and  wages.  This  explanation  closely  resembles  that  one  given  by  West  in  his 
Application  of  Capital  to  Land,  published  in  1815,  and  Ricardo  was  not  above 
acknowledging  his  indebtedness  to  West. 


148  THE  PESSIMISTS 

best  soils  of  distant  lands,  soils  equal  in  fertility  to  those  in  the  first 
class.  The  products  of  such  lands  would  be  got  in  exchange  for 
the  manufactured  goods  of  the  home  country,  to  which  the  law  of 
diminishing  returns  does  not  apply.  But  some  account  of  the  cost 
of  transport,  which  increases  the  cost  of  production,  must  be  taken, 
and  this  leads  to  the  same  result,  namely,  a  rent  for  those  nearest  the 
market,  because  of  the  advantages  of  a  superior  situation.  Distance 
and  sterility,  as  J.  B.  Say  remarks,  are  the  same  thing.  If  land  in 
America  yields  corn  at  10s.  a  bushel  and  freightage  equals  5s.,  it  is  clear 
that  corn  imported  into  England  must  sell  for  15s. — exactly  the  same 
condition  of  things  as  if  land  of  the  second  order  had  been  cultivated, 
and  English  landlords  of  the  first  class  will  still  draw  a  rent  of  5s. 
This  third  possibility  was  scarcely  mentioned  by  Rieardo,  and  he 
could  hardly  have  foreseen  the  wonderful  developments  in  trans- 
portation that  took  place  during  the  next  fifty  years,  which  resulted 
in  a  reversal  of  the  law  of  diminishing  returns  'and  the  confuting 
of  the  prophets.1 

The  great  Ricardian  theory,  prima  facie  self-evident,  is  in  reality 
based  upon  a  number  of  postulates  to  which  we  must  pay  more 
attention.  Some  of  them  must  be  regarded  as  economic  axioms,  but 
the  validity  of  others  is  somewhat  more  doubtful. 

In  the  first  place  there  is  the  assumption  that  the  produce  of  lands 
unequally  fertile  and  representing  unequal  amounts  of  labour  will 
always  sell  at  the  same  price,  or,  in  other  words,  will  always  possess 
the  same  exchange  value.  Is  this  proposition  demonstrably  sound  ? 
It  is  true  when  the  product  in  question — for  example,  corn — is  of 
uniform  quality  and  kind.  When  the  goods  offered  on  the  same 
market  are  so  much  alike  that  it  is  a  matter  of  indifference  to  the 
buyer  whether  he  takes  the  one  or  the  other,  then  it  is  true  that  he 
will  not  pay  a  higher  price  for  the  one  than  he  will  for  the  other. 
This  is  what  Jevons  called  the  "law  of  indifference."2 

1  Shortly  afterwards  a  German  landowner  published  a  book  dealing  with  just 
that  side  of  the  problem  of  rent  which  had  been  neglected  by  Rieardo,  namely, 
the  influence  of  distance  from  a  market  upon  cultivation  and  the  price  of  pro- 
ducts. We  are  referring  to  Thiinen,  who  in  his  book  Der  Isolerte  Stoat  (vol.  i, 
1826)  draws  a  picture  of  a  town  surrounded  by  a  belt  of  land,  and  shows  how 
cultivation  will  be  distributed  in  concentric  zones  around  that  centre,  and  how 
the  kind  of  cultivation  adopted  will  be  a  function  of  the  distance. 

1  But  the  honour  of  discovering  this  law,  which  is  so  important  for  an  under- 
standing of  exchange  value,  does  not  belong  entirely  to  Rieardo.  Forty  years 
before  a  humble  Scotch  farmer  named  Anderson  had  observed  the  phenomenon 
and  given  a  very  satisfactory  analysis  of  it  in  his  book  Observations  on  the  Means 
of  Exciting  a  Spirit  of  National  Industry  (1777).  "  Now  as  the  expense  of  cultivat- 
ing the  least  fertile  soil  is  as  great  or  greater  than  that  of  the  most  fertile  field, 


RlCARDO  149 

In  the  second  place  it  is  implied  that  this  exchange  value,  uniform 
for  all  identical  products,  is  determined  by  the  maximum  amount 
of  labour  required  for  its  production,  or,  in  other  words,  by  the 
amount  of  labour  necessary  for  the  production  of  the  more  costly 
portion. 

This  brings  us  to  the  Ricardian  theory  of  value.  We  know  that 
he  considered  that  the  value  of  everything  was  determined  by  the 
amount  of  labour  necessary  for  its  production.1  Adam  Smith  had 
already  declared  that  value  was  proportional  to  the  amount  of  labour 
employed,  but  that  this  was  the  case  only  in  primitive  societies.  "  In 
civilised  society,  on  the  contrary,  there  is  a  still  smaller  number  [of 
cases]  in  which  it  consists  altogether  in  the  wages  of  labour."  Labour 
was  regarded  by  Smith  as  one  of  the  factors  determining  value — 
though  by  no  means  the  only  one,  land  and  capital  being  obviously 
the  others. 

But  Ricardo  simplified  matters,  as  abstract  thinkers  frequently 
do,  by  neglecting  the  last-named  factors.  This  leaves  us  only  labour. 
Land  is  dismissed  because  rent  contributes  nothing  to  the  creation  of 
value,  but  is  itself  entirely  dependent  upon  value.2  Corn  is  not  dear 
because  land  yields  rent,  but  land  yields  rent  because  corn  is  dear. 
"  The  clearly  understanding  this  principle  is,  I  am  persuaded,  of  the 
utmost  importance  to  the  science  of  political  economy."  As  for 
capital,  why  should  we  make  a  special  factor  of  it,  seeing  that  it  is 
only  labour  ?  Its  connotation  might  be  extended  so  as  to  include 
"  the  labour  bestowed  not  on  their  immediate  production  only,  but 
on  all  those  implements  or  machines  required  to  give  effect  to  the 
particular  labour  to  which  they  were  applied."  3  But  Ricardo  was 

it  necessarily  follows  that  if  an  equal  quantity  of  corn,  the  produce  of  each  field, 
can  be  sold  at  the  same  price,  the  profit  on  cultivating  the  most  fertile  soil  must 
be  much  greater  than  that  of  cultivating  the  other,  and  as  this  continues  to 
decrease  as  the  sterility  increases,  it  must  at  length  happen  that  the  expense  of 
cultivating  some  of  the  inferior  soils  will  equal  the  values  of  the  whole  produce." 
(Quoted  by  Jevons,  Theory  of  Political  Economy,  p.  229.)  Anderson's  name  was 
forgotten  until  quite  recently,  when  it  attracted  a  certain  amount  of  attention 
among  the  pioneers  of  Ricardo.  Ricardo  himself  does  not  seem  to  be  aware  of 
his  existence ;  at  least  he  never  quotes  him.  The  only  two  writers  mentioned 
by  Ricardo  are  Malthus  and  West. 

1  "  In  speaking,  however,  of  labour  as  being  the  foundation  of  all  value,  and 
the  relative  quantity  of  labour  as  almost  exclusively  determining  the  relative 
value  of  commodities,  I  must  not  be  supposed  to  be  inattentive  to  the  different 
qualities  of  labour."  (Principles,  ed.  Gonner,  p.  15.) 

1  Hume  had  already  pointed  out  the  objection  to  this  view.  Cf.  p.  64,  foot- 
not*. 

*  "  If  fixed  capital  be  not  of  a  durable  nature  it  will  require  a  great  quantity  of 
labour  annually  to  keep  it  in  its  original  state  of  efficiency,  but  the  labour 


150  THE  PESSIMISTS 

not  thoroughly  satisfied  with  this  identification  of  capital  and  labour, 
and,  great  capitalist  that  he  was,  it  must  have  caused  him  much 
searching  of  heart.  Furthermore,  it  was  not  very  easy  to  apply  the 
conception  to  such  commodities  as  timber  and  wine,  which  increase 
in  value  as  they  advance  in  age.  In  a  letter  to  McCulloch  he  admits 
the  weakness  of  his  theory.  After  all  the  study  that  he  had  given  to 
the  matter,  he  had  to  confess  that  the  relative  value  of  commodities 
appeared  to  be  determined  by  two  causes  :  (1)  the  relative  quantity  of 
labour  necessary  for  its  production ;  (2)  the  relative  length  of  time 
required  to  bring  the  commodity  to  market.  He  seems  to  have  had 
a  presentiment  of  the  operation  of  a  new  and  distinct  factor,  to  which 
Bohm-Bawerk  was  to  ascribe  such  importance. 

The  usual  method  of  stating  the  Ricardian  theory  of  value  is  to 
say  that  value  is  determined  by  cost  of  production.  It  is  also  the 
correct  way,  inasmuch  as  he  stated  it  thus  himself.  It  is,  however, 
quite  a  different  thing  to  say  on  the  one  hand  that  value  is  deter- 
mined by  labour  and  on  the  other  that  it  depends  upon  the  sum  of 
wages  and  profits  (supposing  we  omit  rent).1  On  this  point,  as 
on  several  others,  obscurity  of  thought  alone  saves  Ricardo  from 
the  reproach  of  self-contradiction. 

Suppose  we  proceed  a  step  farther.  The  statement  that  value  is 
determined  by  labour  is  not  enough  to  account  for  the  phenomenon 
of  rent.  Let  us  imagine  a  market  where  three  sacks  of  corn  are 
available  for  sale.  Let  us  further  suppose  that  the  production  of  each 
involved  a  different  quantity  of  labour,  one  being  produced  on  land 
that  was  very  fertile,  the  other  on  soil  that  was  less  generous,  etc. 
Every  sack  will  sell  at  the  same  price,  but  the  question  is,  which  of 
those  different  quantities  of  labour  is  the  one  that  determines  the 
price  ?  Ricardo  replies  that  it  is  the  maximum  quantity,  and  the 
value  of  the  corn  is  determined  by  the  value  of  that  sack  which  is 
produced  under  the  greatest  disadvantages.  But  why  should  it 
not  be  determined  by  the  value  of  the  sack  grown  under  the  most 
favourable  circumstances,  or  by  the  value  of  that  other  sack  raised 
under  conditions  of  average  difficulty  ? 

That  is  impossible.  Let  us  imagine  that  the  three  sacks  of  corn 
came  from  three  different  kinds  of  land,  A,  B,  and  C,  where  the 

so  bestowed  may  be  considered  as  really  expended  on  the  commodity  manufac- 
tured, which  must  bear  a  value  hi  proportion  to  such  labour."  (Principles,  ed. 
Conner,  p.  32.) 

1  In  a  note  on  Section  VI,  chap.  1,  he  adds :  "  Malthus  appears  to  think 
that  it  is  a  part  of  my  doctrine  that  the  cost  and  value  of  a  thing  should  be 
the  same — it  is,  if-  he  means  by  cost,  cost  of  production  including  profits." 
(Ibid.,  p.  39.) 


RlCARDO  151 

necessary  quantities  of  labour  were  respectively  10,  15,  and  20.  It 
is  inconceivable  that  the  price  should  fall  below  20,  the  cost  e»f 
production  of  corn  grown  on  C,  for  if  it  did  C  would  no  longer  be 
cultivated ;  but  the  produce  of  C  is  ex  hypothtsi  indispensable.  The 
market  price  cannot  rise  above  20,  for  in  that  case  lands  of  the  fourth 
class  would  be  brought  under  cultivation,  and  their  yield  would  be 
added  to  the  quantity  already  on  the  market.  The  supposition 
is  that  the  quantity  of  corn  on  the  market  is  already  sufficient  to 
meet  the  demand,  and  the  increase  in  supply  would  soon  cause  the 
price  to  fall  again  to  the  irreducible  minimum  of  20. 

We  cannot  but  admire  the  ingenuity  of  a  demonstration  that 
seeks  to  explain  a  phenomenon  like  rent — which  is  a  revenue  ob- 
tained independently  of  all  labour — by  the  aid  of  a  generalisation 
which  regards  labour  as  the  one  source  of  value.  But  the  explanation 
is  ingenious  rather  than  convincing,  for  it  is  quite  clear  that  only  in 
the  case  of  one  of  the  sacks  do  value  and  amount  of  labour  actually 
coincide.  In  the  two  other  instances  the  quantity  of  labour  and 
exchange  value  are  absolutely  and  indefinitely  divergent. 

Most  contemporary  economists,  while  denying  that  value  is 
solely  the  product  of  labour  and  preferring  to  regard  it  as  a  reflection 
of  human  preferences,  would  willingly  recognise  the  element  of 
truth  contained  in  the  Ricardian  view.  But  it  must  be  understood 
in  the  sense  that  competition,  although  tending  to  reduce  price  to  the 
level  of  cost  of  production,  cannot  reduce  it  below  the  maximum 
cost  of  production,  or  the  price  necessary  to  repay  the  expenses  of 
producing  the  most  costly  portion  of  the  total  amount  demanded 
by  the  market.1  In  this  sense  it  is  true  not  only  of  agricultural 
but  also  of  all  other  products,  and  it  has  a  wider  scope  than  was  at 
first  ascribed  to  it  by  its  authors.  Rent  is  nowadays  recognised  as 
an  element  which  enters  into  all  incomes.  But  with  an  extension  of 
sway  has  gone  attenuation,  and  the  term  has  lost  something  of  its 
original  significance  and  precision.  To-day  rent  is  treated  as  the 
outcome  of  certain  favourable  conjunctures,  which  are  to  be  found 
in  all  stations  in  life,  and  it  is  no  uncommon  thing  to  speak  of 
consumer's  rent  even. 

The  Ricardian  theory,  moreover,  presupposed  the  existence  of 
a  class  of  land  which  yielded  no  rent,  the  returns  which  it  gave 
being  only  just  sufficient  to  cover  cost  of  production.  In  other 

1  Still  we  must  note  that  Ricardo  and  Karl  Marx,  like  everyone  who  has 
tried  to  base  a  theory  of  value  upon  labour,  tacitly  assume  the  operation  of  the 
law  of  demand  and  supply  in  order  that  their  theories  may  fit  in  with  the 
fact*. 


152  THE  PESSIMISTS 

words,  Ricardo  only  recognised  the  existence  of  differential  rents, 
and  dismissed  the  other  cases  mentioned  by  Malthus. 

It  really  seems  as  if  Malthus  were  in  this  instance  more  correct 
than  Ricardo.  It  is  quite  possible  that  in  the  colonies,  for  example, 
there  may  be  lands  which  yield  no  rent  because  of  the  superabundance 
of  fertile  land.  Or  the  same  thing  may  occur  in  an  old  country 
because  of  the  extreme  poverty  of  the  land.  But  it  is  quite  evident 
that  in  a  society  having  a  certain  density  of  population  the  mere 
fact  that  there  exists  only  a  limited  amount  of  land  is  enough  to 
give  to  all  lands  and  to  their  products  a  scarcity  value  independent 
of  unequal  returns.  Nor  would  the  case  be  materially  different  if 
all  lands  were  supposed  to  be  of  equal  fertility,  for  who  would  be 
willing  to  cultivate  land  which  only  yielded  the  bare  equivalent  of 
the  expenses  of  production  ? 

Ricardo's  unwillingness  to  recognise  this  other  class  of  rent,  which 
depends  solely  upon  the  limited  quantity  of  land,  was  due  to  the 
fact  that  it  would  have  contradicted  his  other  theory  that  there  is  no 
value  except  labour.  It  is  true  that  he  made  an  exception  of  some 
rare  "  products,"  such  as  valuable  paintings,  statuary,  books, 
medals,  first-class  wines,  etc.,  the  quantity  of  which  could  not  be 
increased  by  labour.  Nobody  would  have  taken  any  notice  of  such 
a  slight  omission  as  that,  but  had  he  left  out  such  an  important 
item  of  wealth  as  the  earth  itself  there  would  be  great  danger  of  the 
whole  theory  crumbling  to  dust.1 

Such  is  the  theory  of  rent,  celebrated  above  all  economic  doc- 
trines, and  concerning  which  it  might  be  said  that  no  doctrine,  not 
even  that  of  Malthus,  has  ever  excited  such  impassioned  criticism. 
For  this  there  are  several  reasons. 

In  the  first  place,  it  led  to  an  overthrow  of  the  majesty  of  the 
"  natural  order  "  by  simply  depicting  some  of  its  gloomier  aspects. 
Men  had  been  led  to  believe  that  the  "  order  "  was  for  ever  beyond 
challenge.  Now,  however,  it  seemed  that  if  the  new  doctrine  was 
true  then  the  interests  of  the  landed  proprietors  were  opposed  not 
only  to  those  of  every  other  class  in  the  community — for  sharing 
always  begets  antagonism — but  also  to  the  general  interest  of  society 
as  a  whole. 

For  what  are  the  real  interests  of  proprietors  ?  First,  that 
population  and  its  demands  should  increase  as  rapidly  as  possible 

1  But  how  was  it  that  he  never  realised  that  land  at  least  in  any  given  country, 
and  indeed  for  that  matter  over  the  whole  world,  is  simply  a  kind  of  wealth  "  of 
which  no  labour  could  increase  the  quantity  "  ? 


RlCARDO  153 

in  order  that  men  may  be  forced  to  cultivate  new  lands,  and  that 
these  new  lands  should  be  as  sterile  as  possible,  requiring  much 
toil  and  thus  causing  an  increase  in  rents.  Exhaustive  labour 
bestowed  upon  the  cultivation  of  land  that  is  gradually  becoming 
poorer  and  poorer  would  soon  make  the  fortune  of  every  landlord. 

As  a  class,  proprietors  have  every  interest  in  retarding  the  pro- 
gress of  agricultural  science,  a  paradox  which  the  slightest  reflection 
will  show  to  be  true.  Every  advance  in  agricultural  science  must 
mean  more  products  from  the  same  amount  of  land  and  a  check  upon 
the  law  of  diminishing  returns,  resulting  in  lower  prices  and  reduced 
rents,  since  it  would  no  longer  be  necessary  to  cultivate  the  poorer 
soils.  In  a  word,  since  rent  is  measured  by  reference  to  the  obstacles 
which  thwart  cultivation,  just  as  the  level  of  water  in  a  pond  is 
determined  by  the  height  of  the  sluice,  everything  that  tends  to 
lower  this  obstacle  must  reduce  the  rent.  In  mitigation  of  this  charge 
it  must,  however,  be  noted  that,  taken  individually,  every  proprietor 
is  of  necessity  interested  in  agricultural  improvement,  because  he 
may  have  an  opportunity  of  benefiting  by  larger  crops  before  the 
improvements  have  become  general  enough  to  lower  prices  and  to 
push  back  the  margin  of  cultivation.  If  every  proprietor  argued  in 
this  way,  individual  interest  would  finally  cheat  itself,  to  the  advan- 
tage of  the  general  public.  But  this  is  nothing  to  be  very  proud  of. 

Ricardo  set  out  to  demonstrate  the  antagonism,1  and  with  what 
a  vigorous  pen  does  he  not  picture  it !  The  study  of  this  question  of 
rent  made  of  him  a  Free  Trader  stauncher  than  Adam  Smith,  more 
firmly  convinced  than  the  Physiocrats.  Free  Trade  was  for  them 
founded  upon  the  conception  of  a  general  harmony  of  interests,  while 

1  "  The  dealings  between  the  landlord  and  the  public  are  not  like  dealings  in 
trade,  whereby  both  the  seller  and  the  buyer  may  equally  be  said  to  gain,  but 
the  loss  is  wholly  on  one  side  and  the  gain  wholly  on  the  other."  (Principle*,  ed. 
Conner,  p.  322.)  And  so  when  a  proprietor  sells  corn  to  a  consumer  it  is  not  of 
the  nature  of  an  ordinary  bargain  where  both  parties  gain  something.  The 
consumer  gets  nothing  in  return  for  what  he  gives,  i.e.  for  what  he  gives  over 
and  above  what  it  has  cost  to  produce  the  corn.  To  get  nothing  in  return  for 
something  given  is  the  kind  of  transaction  that  generally  goes  by  the  name  of  theft. 

Ricardo  soon  finds  a  reply  to  the  comfortable  doctrine  of  Smith,  that  the 
interests  of  the  landlords  are  nowhere  opposed  to  those  of  the  rest  of  the  com- 
munity. "  The  interest  of  the  landlord  is  always  opposed  to  that  of  the  con- 
sumer and  manufacturer.  Corn  can  be  permanently  at  an  advanced  price  only 
because  additional  labour  is  necessary  to  produce  it,  because  its  cost  of  production 
is  increased.  It  is  therefore  for  the  interest  of  the  landlord  that  the  cost  attend- 
ing the  production  of  corn  should  be  increased.  This,  however,  is  not  the 
interest  of  the  consumer.  .  .  .  Neither  is  it  the  interest  of  the  manufacturer 
that  corn  should  be  at  a  high  price,  for  the  high  price  of  corn  will  occasion  high 
wage?,  but  will  not  raise  the  price  of  his  commodity."  (Ibid.,  p.  322.) 

K.D.  * 


154  THE  PESSIMISTS 

Ricardo  built  his  faith  upon  one  clearly  demonstrated  fact — the  high 
price  of  corn  and  its  concomitant,  high  rents.  Free  Trade  seemed  to 
be  the  means  of  checking  this  disastrous  movement.  The  free 
importation  of  corn  implied  the  cultivation  of  distant  lands  as  rich 
as  or  even  richer  than  any  in  Britain.  All  this  meant  avoiding  the 
cultivation  of  inferior  lands  and  reducing  the  high  price  of  corn. 

He  was  also  desirous  of  proving  to  the  proprietors  that  the  practice 
of  free  exchange,  even  though  it  might  involve  some  loss  of  revenue 
to  them,  was  really  to  their  interest.  Their  opposition,  he  thought, 
was  very  short-sighted.  "  They  fail  to  see,"  he  writes,  "  that  com- 
merce everywhere  tends  to  increase  production,  and  that  as  a  result 
of  this  increased  production  general  well-being  is  also  improved, 
although  there  may  be  partial  loss  as  the  result  of  it.  To  be  con- 
sistent with  themselves  they  ought  to  try  to  arrest  all  improvement 
in  agriculture  and  manufacture  and  all  invention  of  machinery."  J 

The  theory  of  rent,  in  the  second  place,  endangered  the  reputation 
of  landowners  by  showing  that  their  income  is  not  the  product  of 
labour,  and  is  consequently  anti-social.  No  wonder  that  it  has  been 
so  severely  criticised  by  conservative  economists.  Ricardo  himself, 
however,  seemed  quite  unconscious  of  the  nature  of  the  blow  thus 
aimed  at  the  institution  of  private  property.  His  indifference, 
which  appears  to  us  so  surprising,  is  partly  explained  by  the  fact  that 
the  theory  absolved  the  proprietor  from  all  responsibility  in  the 
matter.  Unlike  profits  and  wages,  rent  does  not  figure  in  cost  of 
production  because  it  makes  no  contribution  to  the  price  of  corn, 
but  is  itself  wholly  determined  by  that  price.2  The  landed  proprietor 
thus  appears  as  the  most  innocent  of  the  co-partners,  playing  a  purely 
passive  role.  He  does  not  produce  rent,  but  simply  accepts  it. 

That  may  be ;  but  the  fact  that  the  proprietor  plays  no  part 
in  the  production  of  rent,  whilst  exonerating  him  from  complicity 

1  "  Wealth  increases  most  rapidly  in  those  countries  where  the  disposable 
land  is  most  fertile,  where  importation  is  least  restricted,  and  where,  through 
agricultural  improvements,  productions  can  be  multiplied  without  any  increase 
in  the  proportional  quantity  of  labour,  and  where  consequently  the  progress  of 
rent  is  slow."  (Principles,  ed.  Conner,  p.  54.)  The  contrast  between  fertile 
lands,  free  exchange,  and  the  development  of  agricultural  science  on  the  one 
hand,  and  the  growth  of  rent  on  the  other,  is  very  strikingly  brought  out  in  this 
paragraph. 

1  "  Rent  does  not  and  cannot  enter  in  the  least  degree  as  a  component  part 
of  its  price."  (Tbid.,  p.  55.)  And  he  adds  :  "  The  clearly  understanding  of  this 
principle  is,  I  am  persuaded,  of  the  utmost  importance  to  the  science  of  political 
economy."  It  is  true  that  Smith,  writing  long  before  this  time,  had  declared 
that  the  "  high  rate  of  rent  is  the  effect  of  price,"  but  he  does  not  seem  to  hava 
attached  any  great  importance  to  the  remark. 


RlCARDO  155 

in  its  invidious  consequences,  spells  ruin  to  his  title  of  proprietor — 
that  is,  if  we  consider  labour  to  be  the  only  title  to  proprietorship. 
It  was  just  this  aspect  of  the  question  that  drew  the  attention  of 
Ricardo's  contemporary  James  Mill.  Mill  advocated  the  confiscation 
of  rent  or  its  socialisation  by  means  of  taxation.1  He  thus  became  a 
pioneer  in  the  movement  for  land  nationalisation,  a  cause  that  has 
since  been  championed  by  such  writers  as  Colins,  Gossen,  Henry 
George,  and  Walras. 

Finally,  the  theory  of  rent  seems  to  give  colour  to  certain  theories 
which  predict  an  extremely  dark  future  for  the  race,  corroborating  the 
gloomy  forebodings  of  Malthus.  As  society  grows  and  advances  it  will 
be  forced  to  employ  lands  that  are  less  fertile  and  means  of  production 
that  are  more  onerous.  It  seems  as  if  the  curse  uttered  in  Genesis  has 
been  scientifically  verified.  "  Thorns  also  and  thistles  shall  it  bring 
forth  to  thee  ;  ...  in  the  sweat  of  thy  face  shalt  thou  eat  bread." 

True,  he  did  not  carry  his  pessimism  so  far  as  to  say  that  as  the 
result  of  this  fatal  exhaustion  of  this  most  precious  instrument  of 
production  the  progress  of  mankind  would  for  ever  be  arrested  by 
the  ravages  of  famine.  Other  beneficent  forces,  thje  progress  of 
agricultural  science  and  a  larger  employment  of  capital,  would  sur- 
mount the  difficulty.  "  Although  the  lands  that  are  actually  being 
cultivated  may  be  inferior  to  those  which  were  in  cultivation  some 
years  ago,  and  consequently  production  is  becoming  more  difficult, 
can  anyone  doubt  that  the  quantity  of  products  does  not  greatly 
exceed  that  formerly  produced  ?  " 

Ricardo's  theory  does  not  involve  a  denial  of  progress.  But  it 
shows  how  the  struggle  is  becoming  more  and  more  difficult,  and  how 
scarcity  and  want,  if  not  actual  famine,  must  lie  in  the  path  along 
which  we  are  advancing.  Suppose  Great  Britain  were  now  to 
attempt  to  feed  her  45  million  inhabitants  from  her  own  soil,  would 
there  be  much  doubt  as  to  the  correctness  of  Ricardo's  prophecy  ? 

1  Ricardo  wisely  admits  the  possibility  ot  confiscating  this  rent  by  means  of 
taxation,  the  reason  for  this  being  that  "  a  tax  on  rent  would  affect  rent  only  , 
it  would  fall  wholly  on  landlords  and  could  not  be  shifted  to  any  class  of  con- 
sumers." (Principles,  ed.  Conner,  p.  164.)  And  the  argument  which  he 
advances  in  proof  of  this,  namely,  that  the  tax  could  not  be  shifted,  seems  to 
indicate  that  this  particular  kind  of  revenue  is  not  quite  as  intangible  as  that  of 
some  other  classes  in  society.  But  his  advocacy  is  somewhat  restrained,  for,  as 
he  points  out,  it  would  be  unjust  to  put  all  the  burden  of  taxation  upon  the 
nhoulders  of  one  class  of  the  community.  Rent  is  often  the  property  of  people 
who,  after  years  of  toil,  have  invested  their  earnings  in  land.  The  original 
injustice,  if  any,  would  thus  be  got  rid  of  in  the  process  of  selling  the  land.  This 
might  be  a  sufficient  reason  for  indemnifying  the  expropriated,  but  it  is  not 
enough  to  condemn  expropriation  altogether. 


156  THE  PESSIMISTS 

It  is  an  easy  matter  to  reproach  Ricardo  *•  with  his  failure  to  fore- 
see the  remarkable  development  in  the  methods  of  transport  and 
cheap  importation  which  resulted  in  the  arrest,  if  not  the  reversal,  of 
the  upward  movement  of  the  rent  curve.  The  complaints  of  landlords 
both  in  England  and  Europe  seem  to  belie  the  Ricardian  theory.2 
But  who  can  tell  whether  the  peril  is  finally  removed  or  not  ? 
The  inevitable  day  will  arrive  when  new  countries  will  consume 
the  corn  which  to-day  they  export.  This  may  not  come  about 
in  the  history  of  England  and  Europe  for  some  centuries  yet, 
but  when  it  does  happen,  rent,  instead  of  being  stationary  and 
retrogressive,  as  it  has  been  so  long,  will  again  resume  its  upward 
trend. 

It  is  true  that  we  may  reckon  upon  the  aid  of  agricultural  science 
even  if  foreign  importation  should  fail  us.  Ricardo  was  ever  mind- 
ful of  the  great  possibilities  of  human  industry.  Other  economists, 
notably  Carey  and  Fontenay,  one  of  Bastiat's  disciples,  have  pro- 
pounded a  theory  which  is  the  exact  antithesis  of  the  Ricardian, 
namely,  that  human  industry  hi  its  utilisation  of  natural  forces 
always  begins  twith  the  feeblest  as  being  more  easily  tamed,  the  more 
powerful  and  recalcitrant  forces  only  coming  in  for  attention  later 
on.  The  earth  is  no  exception  to  the  rule,  and  agricultural  industry 
might  well  become  not  less  but  more  productive. 

1  "Malthus  and  Ricardo  have  both  proved  false  prophets  and  mistaken 
apostles.  The  much-vaunted  Ricardian  law  is  a  pure  myth."  (Article  by 
M.  de  Foville  on  Lea  Variations  de  la  Valeur  du  Sol  en  Angleterre  au  XIX'  Si&de, 
in  L'Hconomiste  fran$aia,  March  21,  1908. 

1  Mr.  Robert  Thompson,  in  a  paper  read  before  the  Royal  Statistical  Society 
on  December  17, 1907,  has  shown  how  the  average  rent  per  acre,  valued  at  11s.  2cL 
in  1801-5,  reached  the  figure  of  20s.  in  1841-45,  and  despite  the  abolition  of 
protection  continued  to  rise  up  to  1872-77,  when  it  reached  a  maximum  of 
29s.  4d.  It  then  continued  to  fall  until  it  reached  the  present  amount  of  20s. 
The  present  figure  is  double  what  it  was  in  Ricardo's  time,  but  considerable 
deductions  are  necessary  in  view  of  the  improvements  made  in  the  character  of 
the  soil.  Thompson,  after  making  these  deductions,  puts  the  amount  at  15s.  5d., 
leaving  just  4s.  7d.  for  rent  pure  and  simple.  The  11s.  for  rent  at  the  beginning 
of  the  century  covered  something  besides  economic  rent.  Considerable  deduc- 
tions are  again  necessary,  but  the  amount  of  capital  employed  in  agriculture  was 
much  less  then. 

One  seems  justified  in  saying  that  in  England  and  even  in  France  and  other 
Protective  countries  the  land  has  lost  both  in  revenue  and  value  during  the 
last  quarter  of  the  nineteenth  century  almost  all  that  it  had  gained  from  the 
time  of  Ricardo  up  till  then.  But  is  the  recoil  sufficient  to  justify  Foville's 
description  of  Ricardo's  vaunted  law  as  a  pure  myth  ?  We  think  not.  It  has 
the  experience  of  seventy-five  years  behind  it  and  of  twenty-five  years  against  it, 
that  is  all.  Anyone  who  would  predict  a  further  fall  in  rent  would  certainly  be 
running  the  risk  of  becoming  a  false  prophet. 


RlCARDO  157 

This  thesis,  which  implies  a  negation  of  the  law  of  diminishing 
returns,  is  based  upon  a  very  debatable  analogy. 

When  speaking  of  the  future  of  industry  it  is  well  to  remember 
that  forces  now  seldom  used,  and  perhaps  seldom  thought  of,  such 
as  the  energies  liberated  by  chemical  and  intennolecular  action,  may 
hold  infinite  resources  in  reserve  for  mankind.  But  agriculture  is 
different.  Admitting  that  with  nitrogen  got  from  the  atmosphere,  or 
with  phosphorus  extracted  from  the  subsoil,  we  may  enrich  the  land 
indefinitely,  still  we  are  continually  confronted  with  the  limitations 
of  time  and  space,  which  must  determine  the  development  of  living 
things,  and  of  agricultural  products  among  them.  When  albumen 
can  be  scientifically  produced  then  will  the  Ricardian  theory  become 
obsolete.  Until  then  it  holds  the  field. 

2.  OF  WAGES  AND  PROFITS 

Let  us  now  approach  these  two  laws  of  Malthus  and  Ricardo — 
the  law  of  population  and  the  law  of  rent — and  ask  what  effect  they 
are  likely  to  have  upon  the  condition  of  the  worker  and  the  amount  of 
his  wages.  The  answer  is  not  very  reassuring.  On  the  one  hand 
there  is  an  indefinite  increase  in  the  numbers  of  the  proletariat — 
the  result  of  unchecked  procreation,  for  "  the  moral  restraint "  can 
hardly  be  said  to  have  influence  at  all.  The  inevitable  result  is  the 
degradation  of  human  labour.  On  the  other  hand,  the  law  of 
diminishing  returns  causes  a  continuous  rise  in  the  price  of  necessaries. 
Between  low  wages  on  the  one  hand  and  high  prices  on  the  other,  the 
worker  feels  himself  crushed  as  between  the  hammer  and  the  anvil. 

Turgot  had  long  since  given  utterance  to  the  tragic  thought 
that  the  wages  of  the  worker  are  only  just  sufficient  to  keep  him  alive. 
His  contemporary  Necker  gave  expression  to  the  view  in  terms  still 
more  melancholy.  "  Were  it  possible,"  writes  Necker,  "  to  discover 
a  kind  of  food  less  agreeable  than  bread  but  having  double  its  sus- 
tenance, people  would  then  be  reduced  to  eating  only  once  in  two 
days."  These  must  be  looked  upon  as  mere  isolated  statements, 
sufficiently  well  attested  by  contemporary  facts,  perhaps,  but  laying 
no  claim  to  be  considered  general,  permanent,  and  inevitable  laws 
such  as  Ricardo  and  Malthus  would  have  regarded  them. 

And  Ricardo  still  more  emphatically  declares  that  "  the  natural 
price  of  labour  is  that  price  which  is  necessary  to  enable  the  labourers 
one  with  another  to  subsist  and  to  perpetuate  their  race  without 
either  increase  or  diminution."  Note  the  last  words,  "  without  in- 
crease or  diminution  "  ;  that  is,  if  a  working  man  has  more  children 
than  are  necessary  for  replacing  their  parents,  then  their  wages  will 


158  THE  PESSIMISTS 

fall  below  the  normal  rate  until  increased  mortality  shall  have  again 
established  equilibrium. 

This  is  not  tantamount  to  saying  that  nominal  wages  measured  in 
terms  of  money  cannot  increase.  Indeed,  it  is  absolutely  necessary 
that  they  should  increase,  seeing  that  the  price  of  commodities  is 
continually  rising.  If  they  were  to  remain  the  same  the  workman 
would  soon  be  reduced  to  starvation.  Wages  accordingly  will  show  a 
tendency  to  rise  in  sympathy  with  the  rising  price  of  corn,  so  that 
the  workman  will  always  be  able  to  procure  just  the  same  quantity 
of  bread,  no  more  and  no  less.  It  is  his  real  wages  measured  in 
corn  that  remain  stationary,  and  upon  this  depends  the  well-being 
of  the  working  class. 

But  do  they  really  remain  stationary  ?  Ricardo  does  not  seem 
to  think  so.  "  In  the  natural  advance  of  society  the  wages  of  labour 
will  have  a  tendency  to  fall,  as  far  as  they  are  regulated  by  supply 
and  demand ;  for  the  supply  of  labourers  will  continue  to  increase  at 
the  same  rate,  whilst  the  demand  for  them  will  increase  at  a  slower 
rate."  » 

It  is  even  possible  that  an  increase  in  nominal  wages  may  hide  a 
decrease  in  real  wages.  In  that  case,  of  course,  wages  will  appear  to 
rise,  but  "  the  fate  of  the  labourer  will  be  less  happy  ;  he  will  receive 
more  money  wages  it  is  true,  but  his  corn  wages  will  be  reduced." 
Only  when  the  working  classes  are  sufficiently  thoughtful  to  limit 
the  number  of  their  children  will  it  be  possible  to  hope  for  a  preserva- 
tion of  the  status  quo.  "  It  is  a  truth  which  admits  not  a  doubt,  that  the 
comforts  and  well-being  of  the  poor  cannot  be  permanently  secured 
without  some  regard  on  their  part  or  some  effort  on  the  part  of  the 
legislature  to  regulate  the  increase  of  their  numbers,  and  to  render 
less  frequent  among  them  early  and  improvident  marriages." 

In  other  words,  there  will  always  be  a  demand  for  a  certain  number 
of  individuals  in  order  to  supply  the  needs  of  industry.  So  long  as 
this  indispensable  minimum  is  not  exceeded  the  wages  even  of  the 
very  lowest  order  must  be  sufficient  to  maintain  existence,  for  they 
must  all  be  kept  alive  at  any  rate.  But  should  the  working  popu- 
lation exceed  this  demand  nothing  can  prevent  wages  falling  even 
below  the  minimum  necessary  for  existence,  for  there  will  no  longer 
be  any  necessity  for  keeping  them  all  alive. 

It  must  be  remarked  here  that  on  this  question,  as  on  that  of 
rent,  Malthus  is  less  pessimistic  than  Ricardo.  Far  from  maintaining 
that  every  rise  in  wages  of  necessity  involves  an  excess  of  population 

1  "  The  condition  of  the  labourer  will  generally  decline,  and  that  of  the  land- 
lord will  always  be  improved."  (Principles,  ed.  Gonner,  p.  79.) 


RlCARDO  159 

and  a  consequent  lowering  of  wages,  Malthus  believed  that  a 
capacity  for  forethought,  which  constitutes  the  most  efficacious  check 
upon  the  operation  of  blind  instinct,  may  be  engendered  even  among 
the  working  classes,  and  that  a  high  standard  of  life  once  secured 
may  become  permanent.  All  this  may  be  very  true,  but  the 
reasoning  involves  us  in  a  vicious  circle.  In  order  that  a  high  rate  of 
wages  may  produce  its  beneficial  effects  it  must  first  of  all  be  estab- 
lished, but  how  can  it  possibly  be  established  as  long  as  the  working 
classes  remain  steeped  in  the  misery  caused  by  not  exercising  this 
forethought  ? 

An  exit  from  the  circle  is  only  possible  by  recalling  the  fact  that 
the  market  wage  incessantly  oscillates  about  the  natural  wage 
according  to  the  exigencies  of  demand  and  supply.  If  this  accidental 
rise  could  be  prolonged  a  little  it  might  become  permanent  and 
modify  the  workman's  standard  of  life.1 

Such  is  the  law  of  wages,  which  has  long  since  passed  into  an 
axiom,  and  whose  authority  is  invoked  in  every  discussion  on  social 
reform.  To  every  socialistic  scheme,  to  every  proposal  for  social 
reform,  there  is  always  one  answer :  "  There  is  no  means  of  im- 
proving the  lot  of  the  worker  except  by  limiting  the  number  of  his 
children.  His  destiny  is  in  his  own  hands."  2  Latter-day  socialism, 
commencing  with  Lassalle,  makes  a  careful  study  of  the  law,  and 
returns  to  the  charge  against  the  existing  economic  order  by  affirming 
that  in  no  respect  is  it  a  natural  law,  but  merely  a  result  of  the 
capitalist  regime,  upon  which  it  supplies  an  eloquent  commentary. 

We  must  not  fail  to  note  that  in  the  Ricardian  theory  there  is 
not  what  we  can  exactly  call  antagonism  between  the  landed  pro- 
prietor and  the  proletarian.  To  the  latter  it  is  a  matter  of  in- 
difference whether  rents  be  high  or  low,  for  his  money  wages  move 
in  sympathy  with  the  price  of  corn,  but  his  real  wages  never  change. 
The  proprietor  on  his  side  is  equally  indifferent  to  rising  or  falling 
wages,  for  they  never  affect  his  receipts.  His  rent,  as  a  matter  of 
fact,  is  determined  by  the  quantity  of  labour  employed  on  the 
least  fertile  lands,  but  this  quantity  of  labour  has  nothing  to  do  with 

1  "  It  generally  happens,  indeed,  that  when  a  stimulus  has  been  given  to 
population  an  effect  is  produced  beyond  what  the  case  requires.  .  .  .  The  in- 
creased wages  are  not  always  immediately  expended  on  food,  but  are  first  made 
to  contribute  to  the  other  enjoyments  of  the  labourer.  His  improved  condition, 
however,  induces  and  enables  him  to  marry."  (Principles,  ed.  Conner,  p.  96.) 

1  "  Every  suggestion  which  does  not  tend  to  the  reduction  in  number  of  the 
working  people  is  useless,  to  say  the  least  of  it.  All  legislative  interference  must 
be  pernicious."  (Quoted  by  Graham  Wallas,  Life  of  Francis  Place.  Place  was 
the  author  of  a  Look  on  population  which  appeared  in  1822.  > 


160  THE  PESSIMISTS 

the  rate  of  wages.  The  landlords  are  the  grandees  of  a  different 
order.1 

The  real  struggle  lies  between  capitalist  and  worker.  Once  the 
value  of  corn  has  been  determined  by  the  cost  of  producing  it  on 
the  least  favoured  land,  the  proprietor  seizes  whatever  is  over  and 
above  this,  saying  to  both  worker  and  capitalist,  "  You  can  divide  the 
rest  between  you."  This  clearly  is  Ricardo's  view.*  **  Whatever 
raises  the  wages  of  labour  lowers  the  profits  of  stock."  Wages  can 
only  rise  at  the  expense  of  profits,  and  vice  versa — a  terrible  prophecy 
that  has  been  abundantly  illustrated  by  the  fortunes  of  the  labour 
movement,  but  never  more  clearly  than  at  the  present  moment. 

But  the  mere  statement  of  the  fatal  antagonism  between  capitalist 
and  workman  must  have  caused  both  grief  and  surprise  to  those 
economists  who  had  endeavoured  to  demonstrate  the  solidarity  of 
interests  between  them  as  between  brothers.  Bastiat  was  one  of 
these,  and  he  tried  to  show  that  in  the  course  of  economic  evolution 
the  share  of  each  factor  tends  to  grow,  but  that  labour's  shows  the 
greatest  increase. 

There  can  be  no  objection  to  Ricardo's  method  of  stating  the 
law.  The  whole  thing  is  so  evident  that  it  is  almost  a  truism.  A 
cake  is  being  shared  between  two  persons.  If  one  gets  more  than 
his  due  share  is  it  not  evident  that  the  other  must  get  less  ?  It  may 
be  pointed  out,  on  the  other  hand,  that  the  amount  available  for 
distribution  is  continually  on  the  increase,  so  that  the  share  which 
each  participant  gets  may  really  be  growing  bigger.  But  that  is 

1  This  is  a  fundamental  distinction  upon  which  Ricardo  is  always  insisting. 
The  greater  or  smaller  quantity  of  labour  employed  in  the  production  of  corn 
bears  no  necessary  relation  to  the  worker's  wages.  The  one  is  merely  a  question 
of  production,  the  other  of  distribution.  The  one  is  the  task,  the  other  the  reward. 
But  some  might  ask  if  the  Ricardian  theory  of  value  does  not  state  that  the 
value  of  the  product  is  determined  by  the  quantity  of  labour  necessary  for 
its  production,  that  this  value  will  be  subsequently  divided  between  capitalist 
and  worker,  and  that  the  greater  this  quantity  the  greater  will  be  the  share  of  each. 
Labour's  share  may  increase,  but  not  the  labourer's,  for  we  must  not  forget  that 
when  the  price  of  corn  goes  up  from  10s.  to  20s.  it  is  because  the  cultivation  of 
poorer  lands  requires  twice  the  number  of  labourers  demanded  by  the  better  kind 
of  land.  Besides,  it  would  be  a  strange  thing  to  pay  a  man  more  as  the  woi  k 
becomes  less  remunerative.  All  that  one  could  hope  for  would  be  that  the  workers 
under  the  new  conditions  might  be  able  to  retain  their  old  standard  of  life — that 
is,  might  be  able  to  purchase  the  same  quantity  of  bread  despite  the  rise  in  price. 
*  "  Thus,  then,  I  have  endeavoured  to  show  that  a  rise  of  wages  would  in- 
variably lower  profits." 

"  Thus  in  every  case  .  .  ,  profits  are  lowered  ...  by  a  rise  of  wages." 
On  the  inexactness  of  the  term  "  high  rate  of  profits  "  as  a  synonym  for  a 
proportionally  larger  share  of  the  produce  see  note,  p.  162. 


RlCARDO  161 

hardly  the  problem  to  be  solved.1  Increase  the  cake  tenfold,  even 
a  hundredfold,  but  if  one  person  gets  more  than  half  of  it  the  other 
must  have  less.  Ricardo's  implication  is  just  that.  His  law  deals 
with  proportions  and  not  with  quantities. 

Admitting  that  the  proportion  which  one  of  the  two  factors 
receives  can  be  increased  only  if  the  other  is  lessened,  the  problem  is 
to  discover  which  of  the  two,  capital  or  labour,  has  the  bigger 
portion.  It  really  seems  as  if  it  were  labour,  for  Ricardo  speaks 
of  another  law  of  profits,  namely,  "  the  tendency  of  profits  to  a 
minimum."  Here  is  another  thesis  which  has  had  a  long  career  in  the 
history  of  economics,  but  what  are  the  reasons  that  can  be  adduced  in 
support  of  it  ?  The  natural  tendency  of  profits,  then,  is  to  fall ;  "  for 
in  the  progress  of  society  and  wealth  the  additional  quantity  of  food 
required  is  obtained  by  the  sacrifice  of  more  labour."  It  is  deter- 
mined by  the  same  cause  as  determined  rent — the  system  is  a  solid 
piece  of  work  at  any  rate. 

But  how  does  the  cultivation  of  inferior  land  affect  the  rate  of 
profits  ?  We  have  already  seen  how  the  worker's  share,  the  minimum 
necessary  for  keeping  body  and  soul  together,  goes  to  swell  the  high 
price  of  corn.2  But  the  manufacturer  cannot  transfer  the  cost  of 
high  wages  to  the  consumer,  for  the  rate  of  wages  has  no  effect  on 
prices.  (Labour  has,  but  wages  have  none.)  As  a  consequence, 
the  capitalist's  share  must  be  correspondingly  reduced.  We  must 
remember  that  the  workman  gains  nothing  by  the  high  rate  of 
wages,  for  his  consumption  of  food  is  limited  by  nature,  but  this  does 
not  hinder  the  capitalist  losing  a  great  deal  by  it. 

And  so  there  must  come  a  time  when  the  necessary  wage  will 
have  absorbed  everything  and  nothing  will  remain  for  profit.  There 
will  be  a  new  era  in  history,  for  every  incentive  to  accumulate  capital 
will  disappear  with  the  extinction  of  profit.  Capital  will  cease 
growing,  no  new  lands  will  be  cultivated,  and  population  will  be 
brought  to  a  sudden  standstill.3  The  stationary  state  with  its 

1  Ricardo  does  not  deny  this.  Indeed,  he  lays  stress  upon  the  fact  that  he 
is  arguing  on  the  assumption  that  the  value  produced  remains  the  same.  "I 
have  therefore  made  no  allowance  for  the  increasing  price  of  the  other  necessaries, 
besides  food  of  the  labourer  ;  an  increase  which  would  be  the  consequence  of  the 
increased  value  of  the  raw  materials  from  which  they  are  made,  and  which 
would  of  course  further  increase  wages  and  lower  profits." 

1  But  this  only  means  a  rise  in  the  nominal  or  money  wage.  It  does  not 
mean  that  the  worker  gets  more  corn  ;  he  only  gets  the  same  amount  as  before, 
because  the  price  of  corn  has  gone  up  and  it  makes  no  difference  whether  the 
man  is  paid  in  money  or  in  kind. 

1  "  For  as  soon  as  wages  should  be  equal  to  the  whole  receipts  of  the  farmer, 
there  must  be  an  end  of  accumulation  ;  for  no  capital  can  then  yield  any  profit 
K.D.  r* 


162  THE  PESSIMISTS 

melancholy  vistas  will  be  entered  upon.  Mill  has  described  it  in  such 
eloquent  terms  that  we  are  almost  reconciled  to  the  prospect.  But 
it  could  hardly  have  been  a  pleasant  matter  for  Ricardo,  who  was 
primarily  a  financier  and  had  but  little  concern  with  philosophy.  He 
was  very  much  attached  to  his  prophecies,  and  there  is  a  delicate 
piece  of  irony  in  the  thought  that  the  tendency  of  profits  towards  a 
minimum  should  have  been  first  noted  by  this  great  representative  of 
capitalism.  At  the  same  time  he  felt  a  little  reassured  when  he 
thought  of  the  opposing  forces  which  might  check  its  downward 
trend  and  arrest  the  progress  of  rent.  In  both  instances  the  best 
corrective  seemed  to  lie  in  the  freedom  of  foreign  trade. 

The  general  lines  of  distribution  are  presented  to  us  in  a  strikingly 
simple  fashion.  The  demonstration  is  neater  even  than  the  famous 
Tableau  Sconomique,  and  it  has  the  further  merit  of  being  nearer 
the  actual  facts  as  they  appeared  in  Ricardo's  day,  for  they  are  no 
longer  quite  the  same.  It  may  be  represented  by  means  of  a  diagram 
consisting  of  three  lines. 

At  the  top  is  an  ascending  line  representing  rent — the  share  of 
Mother  Earth.  The  proprietor's  rent  reveals  a  double  increase  both 
of  money  and  kind,  for  as  population  and  its  needs  grow  it  requires 
an  increasing  quantity  of  corn  at  an  increased  price.  Still,  the  high 
price  cannot  be  indefinitely  prolonged,  for  beyond  a  certain  point  a 
high  price  of  corn  would  arrest  the  growth  of  population  and  at  the 
same  time  the  growth  of  rent ;  then  it  would  no  longer  be  neces- 
sary to  cultivate  new  lands. 

In  the  middle  is  a  horizontal  line  representing  wages — labour's 
share.  The  real  wages  of  labour  remain  stationary,  for  it  simply 
receives  the  quantity  of  corn  necessary  to  keep  it  alive.  It  is  true 
that  as  the  corn  is  gradually  becoming  dearer  the  worker's  nominal 
wages  increase,  but  with  no  real  benefit  to  him. 

Below  this  is  a  descending  line  representing  profits — capital's 
share.1  It  shows  a  downward  trend  for  the  simple  reason  that  it 

whatever,  and  no  additional  labour  can  be  demanded,  and  consequently  popula- 
tion will  have  reached  its  highest  point."  (Principles,  ed.  Gonner,  p.  67.) 

1  When  speaking  of  a  reduction  of  capital's  share  Ricardo  frequently  employs 
the  phrase  "  a  lowering  of  the  rate  of  profits,"  or  "  a  fall  in  the  rate  of  profits." 
A  fall  in  the  rate  is  not  necessarily  synonymous  with  a  reduction  of  capital's 
share,  however.  The  rate  of  profit  simply  implies  a  certain  proportion  between 
revenue  and  capital — 5  per  cent.,  for  example  ;  there  is  no  suggestion  of  com- 
parison between  the  quantities  drawn  by  capitalist  and  workers  respectively. 
Doubtless  we  must  admit  that  when  the  rate  of  profit  is  diminished,  ceteris  paribus, 
the  part  drawn  by  capital  relatively  to  labour's  share  also  diminishes,  but  it  is 
clear  that  if  the  quantity  of  capital  employed  in  any  industry  were  to  be  doubled, 
or  the  product  halved,  capital,  even  at  the  rate  of  3  instead  of  5  per  cent.,  would 


RlCARDO  163 

finds  itself  squeezed  between  the  proprietor's  share,  which  tends  to 
increase,  and  the  labourer's,  which  is  stationary.  The  capitalist  is 
brought  to  our  notice  in  the  guise  of  an  English  farmer  who  is  obliged 
to  raise  his  servants'  wages  as  the  corn  becomes  dearer,  but  who 
gains  nothing  by  this  rise  because  the  extra  revenue  is  taken  by  the 
proprietor  in  the  form  of  higher  rent.  But  profits  cannot  fall  in- 
definitely, for  beyond  a  certain  point  it  would  involve  an  end  to  the 
employment  of  old  capital  and  the  formation  of  new  capital.  This 
would  hinder  the  cultivation  of  new  lands,  and  would  arrest  the  high 
price  of  corn  and  lower  rent. 

8.  THE  BALANCE  OF  TRADE  THEORY  AND  THE  QUANTITY 
THEORY  OF  MONEY 

Such  are  the  more  characteristic  of  Ricardo's  doctrines — at  any 
rate,  those  that  left  the  deepest  impression  upon  his  successors  and 
caused  the  greatest  stir  among  his  contemporaries.  There  are  other 
doctrines  besides  which,  regarded  as  contributions  to  the  science, 
are  much  more  important  and  more  definite ;  but  just  because  they 
figured  almost  directly  in  the  category  of  universally  accepted  truths 
whose  validity  and  authorship  have  never  been  questioned  they 
have  contributed  less  to  his  fame.  Such  are  his  theories  of  inter- 
national trade  and  banking,  where  the  theorist  becomes  linked  to  a 
first-rate  practical  genius.  Here  at  any  rate  there  is  no  note  of 
pessimism  and  no  suggestion  of  conflicting  interests.  On  the  con- 
trary, he  was  able  to  point  out  that  "  under  a  system  of  perfectly  free 
commerce  the  pursuit  of  individual  advantage  is  admirably  con- 
nected with  the  universal  good  of  the  whole." 

In  the  matter  of  international  trade  he  showed  himself  a  more 
resolute  Free  Trader  than  either  Smith  or  the  Physiocrats.  It  seemed 
to  him  that  the  only  way  of  arresting  the  terrible  progress  of  rent 
and  of  checking  the  rising  price  of  com  and  the  downward  tendency 
of  profits  was  by  the  freest  importation  of  foreign  corn.1 

In  addition  to  this  twofold  argument  in  favour  of  Free  Trade, 

be  drawing  a  more  considerable  share  and  leaving  labour  with  less.  Bastiat,  as 
we  shall  have  to  note,  made  the  same  mistake. 

1  In  a  letter  to  Malthas,  December  18,  1814,  he  admits  with  a  sigh  of  regret 
that  even  if  a  belt  of  fertile  land  were  added  to  this  island  of  ours  profits  would  still 
keep  up.  Free  Trade  has  added  the  illimitable  zone  of  fertile  land  which  Ricardo 
dreamed  of,  with  the  result  that  both  profits  and  rente  have  fallen. 

In  his  essay  On  Protection  to  Agriculture  (1822)  he  shows  how  Protection,  by 
forcing  the  cultivation  of  less  fertile  lands  at  home,  raises  the  price  of  corn  and 
increases  rents  ;  and  his  demand  was  not  for  free  importation,  but  for  a  redaction 
of  the  duty  to  10s.  a  quarter. 


164  THE  PESSIMISTS 

Ricardo  brings  forward  another  which  is  of  considerable  importance 
even  at  the  present  time.  This  argument  is  based  upon  the  ad- 
vantages which  accrue  from  the  territorial  division  of  labour.  "  By 
stimulating  industry,  by  rewarding  ingenuity,  and  by  using  most 
efficaciously  the  peculiar  powers  bestowed  by  Nature,  it  distributes 
labour  most  effectively  and  most  economically." 

It  may  be  worth  while  remarking  that  his  illustrious  contemporary 
Malthus  remained  more  or  less  of  a  Protectionist.1  It  might  seem 
strange  that  Malthus,  continually  haunted  as  he  was  by  the  spectre 
of  famine,  should  refuse  to  welcome  importation.  But  his  point 
of  view  was  doubtless  largely  that  of  the  modern  agricultural  Pro- 
tectionist, who  believes  that  the  surest  way  of  preserving  a  country 
from  famine  is  not  to  abandon  its  agriculture  to  the  throes  of  foreign 
competition,  but,  on  the  contrary,  to  strengthen  and  develop  the 
home  industry  by  securing  it  a  sufficiently  high  price  for  its  products. 
We  must  also  remember  that  Malthus' s  theory  of  rent  differed  some- 
what from  Ricardo's,  and  that  he  was  not  so  violently  opposed  to 
State  intervention.2 

But  Ricardo's  principal  contribution  to  the  science  was  his  dis- 
covery of  the  laws  governing  the  movements  of  commodities  and 
the  counter-movements  of  money  from  one  place  to  another,  and  the 
admirable  demonstration  which  he  has  given  us  of  this  remarkable 
ebb  and  flow. 

As  soon  as  the  balance  of  commerce  becomes  unfavourable  to 
France,  let  us  say — that  is,  as  soon  as  importation  exceeds  exporta- 
tion say  by  £1,000,000 — money  is  exported  to  pay  for  this  excessive 
importation.  Money  becomes  scarce,  its  value  rises,  and  prices  fall. 
But  a  fall  in  price  will  check  foreign  importation  and  will  encourage 
exportation,  so  that  imports  will  show  signs  of  falling  off  while  exports 
will  grow.  Money  will  no  longer  be  sent  abroad,  and  the  current 
will  begin  to  run  the  other  way,  until  the  £1,000,000  sent  abroad  is 
returned  again.  Moreover,  the  £1,000,000  sent  abroad  will  cause  a 
movement  in  the  opposite  direction — superabundance  and  a  deprecia- 
tion in  the  value  of  money,  high  prices,  a  premium  on  importation 
and  a  check  upon  exportation.  Accordingly  economic  forces  on 
both  sides  will  conspire  to  bring  back  the  balance  of  commerce  to  a 
position  of  equilibrium — that  is,  to  that  position  where  each  country 
will  possess  just  the  quantity  of  money  that  it  needs. 

1  See  An  Inquiry  into  the  Nature  and  Progress  of  Rent. 

2  Cf .  this  unexpected  remark  to  which  H.  Denis  has  recently  drawn  attention : 
"  It  is  evidently  impossible  for  any  Government  to  let  things  just  take  their 
natural  course."     (Malthus,  introduction  to  the  Principles.) 


RlCARDO  165 

It  might  be  pointed  out,  on  the  other  hand,  that  this  somewhat 
complicated  mechanism  can  only  operate  very  slowly,  and  that 
considerable  time  must  elapse  before  the  prices  of  goods  begin  to 
respond  to  the  change  in  the  quantity  of  money.  But  as  a  matter  of 
fact  it  is  not  necessary  to  wait  until  this  phenomenon  becomes 
established,  for  another  striking  feature  precedes  it  and  announces 
its  approach  so  to  speak,  and  this  is,  as  Smith  had  already  noted,  a 
change  in  the  value  of  bills  drawn  on  foreign  countries.  The  foreign 
exchanges  are  so  sensitive  that  the  slightest  rise  is  enough  to  stimulate 
exportation  and  to  check  importation. 

Accordingly  money  seldom  leaves  a  country,  or  only  leaves  it  for 
a  short  time.  In  other  words,  contrary  to  the  generally  accepted 
opinion,  silver  and  gold  in  international  trade  do  little  more  than 
oil  the  wheels  of  commerce.  The  trade  is  carried  on  as  if  the 
metals  were  non-existent.  In  short,  it  is  essentially  of  the  nature 
of  barter.1 

The  explanation  is  very  schematic.  Every  incidental  phenomenon 
is  omitted,  and  the  whole  theory  implies  the  validity  of  the  quantity 
theory  of  money,  which  is  now  open  to  considerable  criticism  as  being 
altogether  inadequate  for  an  explanation  of  the  facts  involved.  But 
this  theory  of  the  automatic  regulation  of  the  balance  of  trade  by 
means  of  variations  in  the  value  of  money,  although  already  hinted 
at  by  Hume  and  Smith,  is  none  the  less  a  discovery  of  the  first  order, 
and  one  that  has  done  service  as  a  working  hypothesis  for  a  whole 
century.2 

Its  explanation  turns  upon  a  particular  theory  of  international 
trade  which  we  can  only  mention  in  passing,  but  which  we  shall  find 
more  fully  developed  in  Stuart  Mill's  theory  of  international  values. 

4.  PAPER  MONEY,  ITS  ISSUE  AND  REGULATION 

The  enunciation  of  the  principles  which  should  govern  the  conduct 
of  bankers  in  issuing  paper  money  is  another  debt  that  we  owe  to  the 

1  "  Gold  and  silver  having  been  chosen  for  the  general  medium  of  circulation, 
they  are  by  the  competition  of  commerce  distributed  in  such  proportions  among 
the  different  countries  of  the  world  as  to  accommodate  themselves  to  the  natural 
traffic  which  would  take  place  if  no  such  metals  existed  and  the  trade  between 
countries  were  purely  a  trade  of  barter." 

1  Ricardo  also  points  out  that  "  if,  which  is  a  much  stronger  case,  we  agreed 
to  pay  a  subsidy  to  a  foreign  Power,  money  would  not  be  exported  whilst  there 
were  any  goods  which  could  more  cheaply  discharge  the  payment."  (McCul- 
loch's  edition,  p.  269.)  As  a  matter  of  fact,  the  European  Powers  who  were 
leagued  against  Napoleon  were  subsidised  in  this  fashion,  the  exports  exceeding 
the  imports  by  many  millions.  The  indemnity  of  6  milliards  of  francs  paid  by 
France  to  Germany  affords  another  illustration  of  the  samo  truth. 


166  THE  PESSIMISTS 

genius  of  Ricardo.  The  Bank  Act  of  1822,  and  that  of  1844  especially, 
which  laid  down  the  future  policy  of  the  Bank  of  England,  represent 
an  attempt  on  the  part  of  the  Government  to  put  his  principles  into 
practice. 

Ricardo  was  an  eye-witness  of  the  great  panic  of  February  26, 
1797,  when  the  reserves  of  the  Bank  of  England  fell  from  ten  millions 
to  a  million  and  a  half,  necessitating  an  Order  in  Council  suspending 
cash  payments.  The  suspension,  which  was  supposed  to  be  a 
temporary  expedient,  extended  right  up  to  1821.  The  depreciation 
in  the  value  of  the  bank-note  averaged  about  10  per  cent.,  but  at 
one  period  towards  the  end  of  the  Napoleonic  wars  it  rose  as  high 
as  80  per  cent.  He  also  witnessed  the  suffering  which  such  depre- 
ciation caused.  Landlords  demanded  the  payment  of  their  rents 
in  gold,  or  claimed  an  increase  in  the  rent  equal  to  the  fall  in  the 
value  of  the  note. 

Ricardo  tried  to  unravel  the  causes  of  this  depreciation  in  his 
pamphlet  entitled  The  High  Price  of  Bullion,  published  in  1809, 
and  came  to  the  conclusion  that  there  was  only  one  cause,  namely, 
an  excessive  supply  of  paper.  At  this  distance  of  time  it  might  not 
be  thought  such  an  extraordinary  discovery  after  all.  Still,  he  had 
the  greatest  difficulty  in  getting  people  to  admit  this,  and  in  refuting 
the  absurd  explanations  which  had  previously  been  suggested.  He 
showed  how  a  depreciation  in  the  value  of  the  note  necessarily  resulted 
in  the  exportation  of  gold,  although  most  of  his  contemporaries,  on 
the  contrary,  believed  that  the  exportation  of  gold  was  the  cause  of 
all  the  mischief  which  they  sought  to  check  by  an  Act  of  Parliament. 
"  The  remedy  which  I  propose  for  all  the  evils  in  our  currency  is 
that  the  Bank  should  gradually  decrease  the  amount  of  their  notes 
in  circulation  until  they  shall  have  rendered  the  remainder  of  equal 
value  with  the  coins  which  they  represent,  or  in  other  words  till  the 
prices  of  gold  and  silver  bullion  shall  be  brought  down  to  their  Mint 
price."  1 

But  if  that  is  the  case  why  not  cut  the  Gordian  knot  and  suppress 
paper  money  altogether  ?  The  reply  shows  how  well  Ricardo  had 
studied  Smith :  "  A  well-regulated  paper  currency  is  so  great  an 
improvement  in  commerce  that  I  should  greatly  regret  if  prejudice 
should  induce  us  to  return  to  a  system  of  less  utility."  "  The  intro- 
duction of  the  precious  metals  for  the  purposes  of  money  may  with 
truth  be  considered  as  one  of  the  most  important  steps  towards  the 
improvement  of  commerce  and  the  arts  of  civilised  life  ;  but  it  is 
no  less  true  that  with  the  advancement  of  knowledge  and  science 
1  Rioardo's  works,  McCulloch's  edition,  p.  287. 


RICARDO  167 

we  discover  that  it  would  be  another  improvement  to  banish  them 
again  from  the  employment  to  which,  during  a  less  enlightened 
period,  they  had  been  so  advantageously  applied."  l 

Proceeding,  he  points  out  that  where  you  have  only  metallic 
money  it  might  happen  that  the  production  of  gold  fails  to  keep 
pace  with  the  growth  of  population,  in  which  case  you  have  a  rise 
in  the  value  of  gold  accompanied  by  a  fall  in  prices.  This  danger 
might  be  obviated  by  a  careful  issue  of  notes  in  accordance  with 
the  demands  of  society.  In  short,  Ricardo  is  so  little  disposed  to 
abandon  the  system  of  paper  money  and  to  return  to  the  previous 
system  of  metallic  money  that,  on  the  contrary,  he  would  prefer  to 
abolish  the  metallic  system  altogether,  taking  good  care  that  paper 
money  did  not  become  superabundant. 

So  convinced  was  he  of  the  superiority  of  paper  money  that  he 
had  no  desire  to  see  the  Bank  resume  cash  payment.  The  result  of 
the  resumption  would  be  a  demand  on  the  part  of  the  public  for  a 
conversion  of  their  paper  money,  "  and  thus,  to  indulge  a  mere 
caprice,  a  most  expensive  medium  would  be  substituted  for  one  of 
little  value." 

But  if  the  notes  are  not  convertible  into  cash,  what  is  there  to 
guarantee  their  value  or  to  regulate  their  issue  and  prevent  deprecia- 
tion ?  This  can  be  done  merely  by  keeping  a  reserve  of  gold  at  the 
bank,  not  necessarily  in  the  form  of  money,  but  in  the  form  of  ingots. 
The  bank  would  not  be  allowed  to  issue  any  notes  beyond  the  value 
of  these  ingots.  This  regulation  would  have  the  effect  of  keeping 
the  value  of  the  note  at  par,  for  bankers  and  money-dealers  would 
immediately  proceed  to  convert  these  notes  into  gold  as  soon  as 
they  showed  any  signs  of  depreciation.  This  would  not  mean, 
however,  that  the  public  at  large  would  again  return  to  the  use 
of  metallic  money,  for  these  ingots  would  be  of  little  use  for  purposes 
of  everyday  life. 

It  is  a  curious  system.  One  would  hardly  expect  the  great 
champion  of  Liberal  political  economy  to  outline  a  banking  system 
which  could  only  operate  through  a  State  bank.  This  was  clearly 
his  opinion,  however.  He  declared  himself  utterly  opposed  to  the 
free  banking  system,  and  doubted  the  ability  of  such  a  system  to 
regulate  the  currency.  "  In  that  sense  there  can  be  no  excess 
whilst  the  bank  does  not  pay  in  specie,  because  the  commerce  of  the 
country  can  easily  employ  and  absorb  any  sum  which  the  bank  may 
send  into  circulation."  *  This  shows  what  little  confidence  a 
Liberal  individualist  like  Ricardo  had  in  the  liberty  of  individuals 

1  Ricardo 's  works,  HcCullocL's  edition,  p.  404.  *  Ibid.,  p.  349. 


)68  THE  PESSIMISTS 

and  their  ability  to  judge  of  the  kind  of  money  that  is  most  service- 
able. 

Ricardo's  disciples  are  legion,  and  among  them  is  every  economist 
of  standing  of  the  earlier  part  of  the  nineteenth  century.  The 
best  known  among  these  are  the  three  writers  who  immediately 
follow  him  in  chronological  order  :  James  Mill,  the  father  of  John 
Stuart  Mill  (Elements  of  Political  Economy,  1821),his  friend  McCulloch 
(Principles  of  Political  Economy,  1825),  and  Nassau  Senior  (Political 
Economy,  1836). 

The  two  first-named  writers  contented  themselves  with  a  vigorous 
defence  of  the  master's  views  without  contributing  anything  very 
new.  We  have  already  referred  to  the  very  different  conclusions 
which  James  Mill  draws  from  the  theory  of  rent,  and  how  he  became 
an  advocate  of  land  nationalisation.  McCulloch  also  was  one  of 
the  earliest  advocates  of  the  right  to  strike. 

Senior  deserves  a  few  pages  to  himself,  for  his  work  in  systema- 
tising  the  Classical  doctrines.  We  shall  deal  with  him  in  our  chapter 
on  John  Stuart  Mill. 


BOOK  II  :  THE  ANTAGONISTS 

WITH  the  completion  of  the  work  of  Say,  Malthus,  and  Ricardo  it 
really  seemed  as  if  the  science  of  political  economy  was  at  last 
definitely  constituted. 

It  would,  of  course,  be  extravagant  to  imagine  that  these  three 
writers  were  unanimous  on  all  questions.  There  were  several  points 
that  still  remained  obscure,  and  more  than  one  theory  that  was 
open  to  discussion.  Despite  its  apparent  rigidity,  it  would  not  have 
required  much  critical  ability  to  detect  flaws  in  the  symmetrical 
doctrine  so  recently  elaborated  and  to  predict  its  ultimate  discredit. 

Hardly,  indeed,  was  their  task  completed  before  the  new  doctrine 
found  itself  subjected  to  a  most  formidable  attack,  which  was 
simultaneously  directed  against  it  from  all  points  of  the  compass. 
The  criticisms  and  objections  advanced  against  the  new  science  of 
political  economy  form  the  subject-matter  of  this  second  book. 

First  comes  Sismondi,  a  purely  critical  mind,  with  a  haunting 
catalogue  of  the  sufferings  and  miseries  resulting  from  free  competi- 
tion. Spirits  still  more  daring  will  essay  the  discovery  of  new  prin- 
ciples of  social  organisation.  The  Saint-Simonians  will  demand 
the  suppression  of  private  property,  the  extinction  of  inheritance,  and 
the  centralised  control  of  industry  by  the  arm  of  an  omniscient 
government.  The  voluntary  socialists — Owen,  Fourier,  Louis  Blanc 
— will  claim  the  substitution  of  voluntary  co-operation  for  per- 
sonal interest.  Proudhon  will  dream  of  the  reconciliation  of  liberty 
and  justice  in  a  perfect  system  of  exchange  from  which  money  shall 
be  excluded.  Finally,  the  broad  cosmopolitanism  of  the  Classical 
writers  is  to  find  a  formidable  antagonist  in  Friedrich  List,  and  a 
new  Protectionism,  based  on  the  sentiment  of  nationality,  is  to 
regild  the  old  Mercantilism  which  seemed  so  hopelessly  battered 
under  the  blows  of  Adam  Smith  and  the  Physiocrats. 

These  very  diverse  doctrines,  along  wLh  much  that  is  fanciful  and 
erroneous,  contain  many  just  ideas,  many  original  conceptions. 
They  never  succeeded  in  supplanting  the  doctrine  of  the  founders  ; 
but  they  demonstrated,  once  for  all,  that  the  science,  apparently  com- 
plete, was  in  reality  far  from  perfection.  To  the  Orthodox  school 
they  flung  the  taunt  which  Hamlet  cast  at  Horatius :  "  There 
are  more  things  in  heaven  and  earth  than  are  dreamt  of  in  your 
philosophy."  In  this  way  fruitful  discussions  were  frequently 

169 


170     SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

raised,  and  the  public  proved  sympathetic  listeners.  The  economists 
who  were  still  faithful  to  the  Classical  creed  began  to  doubt  the 
validity  of  their  deductions  and  were  forced  to  modify  their  methods 
and  to  overhaul  their  conclusions. 

Let  us  now  attempt  to  realise  the  importance  of  the  part  which 
these  critics  played. 


CHAPTER  I  :  SlSMONDI  AND  THE  ORIGINS 
OF  THE  CRITICAL  SCHOOL 

THE  first  thirty  years  of  the  nineteenth  century  witnessed  profound 
transformations  in  the  structure  of  the  economic  world. 

Economic  Liberalism  had  everywhere  become  triumphant. 
In  France  the  corporation  era  was  definitely  at  an  end  by  1791. 
Some  manufacturers,  it  is  true,  demanded  its  re- establishment 
under  the  First  Empire;  but  they  were  disappointed,  and  their 
demands  were  never  re-echoed.  In  England  the  last  trace  of  the 
Statute  of  Apprentices,  that  shattered  monument  of  the  Parlia- 
mentary regime,  was  removed  from  the  Statute  Book  in  1814. 
Nothing  remained  which  could  possibly  check  the  advent  of  laissez- 
faire.  Free  competition  became  universal.  The  State  renounced 
all  rights  of  interference  either  with  the  organisation  of  production 
or  with  the  relations  between  masters  and  men,  save  always  the  right 
of  prohibiting  combinations  in  restraint  of  trade,  and  this  restriction 
was  upheld  with  a  view  to  giving  free  play  to  the  law  of  demand  and 
supply.  In  France  the  Penal  Code  of  the  Empire  proved  as  tyrannous 
as  the  old  regime  or  the  Revolution;  and  although  freedom  of 
combination  was  granted  in  England  by  an  Act  of  1825,  the  defined 
limits  were  so  narrow  that  the  privilege  proved  quite  illusory.  The 
general  opinion  of  the  English  legislator  is  well  expressed  in  the 
report  of  a  Commission  appointed  by  the  House  of  Commons  in 
1810,  quoted  by  Mr.  and  Mrs.  Webb.1  "  No  interference  of  the 
legislature  with  the  freedom  of  trade,  or  with  the  perfect  liberty  of 
every  individual  to  dispose  of  his  time  and  of  his  labour  in  the  way 
and  on  the  terms  which  he  may  judge  most  conducive  to  his  own 
interest,  can  take  place  without  violating  general  principles  of  the 
first  importance  to  the  prosperity  and  happiness  of  the  community." 
In  both  countries — in  England  as  well  as  in  France — a  regime  of 
individual  contract  was  introduced  into  industry,  and  no  legal 
1  S.  and  B.  Webb,  History  of  Tradt  Unionism,  p.  54. 


SlSMONDI   AND   ORIGINS    OF   CRITICAL   SCHOOL    171 

intervention  was  allowed  to  limit  this  liberty — a  liberty,  however, 
which  really  existed  only  on  the  side  of  the  employers. 

Under  this  regime  the  new  manufacturing  industry,  born  of 
many  inventions,  was  wonderfully  developed.  In  Great  Britain 
Manchester,  Birmingham,  and  Glasgow,  in  France  Lille,  Sedan, 
Rouen,  Elbeuf,  Mulhouse,  became  the  chosen  centres  of  large-scale 
production. 

Alongside  of  these  brilliant  successes  we  have  two  new  pheno- 
mena which  were  bound  to  draw  the  attention  of  observers  and  to 
invite  the  reflection  of  the  thoughtful.  First  we  have  the  concentra- 
tion in  the  great  centres  of  wealth  of  a  new  and  miserable  class — the 
workers ;  and,  secondly,  we  have  the  phenomenon  of  over-produc- 
tion. 

Factory  life  during  the  earlier  half  of  the  nineteenth  century 
has  been  the  subject  of  countless  treatises,  and  attention  has  fre- 
quently been  drawn  to  the  practice  of  employing  children  of  all  ages 
under  circumstances  that  were  almost  always  unhealthy  and  often 
cruel,1  to  the  habit  of  prolonging  the  working  day  indefinitely,  to 
the  inadequate  wages  paid,  to  the  general  ignorance  and  coarseness 
of  the  workers,  as  well  as  to  the  deformities  and  vices  which  resulted 
under  such  unnatural  conditions.  In  England,  medical  reports, 
House  of  Commons  inquiries,  and  the  speeches  and  publications  of 
Owen  aroused  the  indignation  of  the  public,  and  in  1819  an  Act 
of  Parliament  was  passed  limiting  the  hours  of  work  of  children  in 
cotton  factories.  This,  the  first  rudiment  of  factory  legislation, 
was  to  be  considerably  extended  during  the  course  of  the  century. 
J.  B.  Say,  who  in  1815  was  travelling  in  England,  declared  that  a 
worker  with  a  family,  despite  efforts  often  of  an  heroic  character, 
could  not  gain  more  than  three-quarters  and  sometimes  only  a  half 
of  what  was  needed  for  his  upkeep.2 

In  France  we  must  wait  until  1840  to  find  in  the  great  work  of 
Dr  Villerme  a  complete  description  of  the  heartrending  life  of  the 
workers  and  the  martyrdom  of  their  children.  Here,  for  example, 
we  learn  that  "  in  some  establishments  in  Normandy  the  thong 
used  for  the  punishment  of  children  in  the  spinner's  trade  appears 
as  an  instrument  of  production."  8  Even  before  this,  in  an  inquiry 

1  In  1835  Andrew  \Jre  (Philosophy  of  Manufactures,  p.  481)  reckoned  that  in 
the  manufacture  of  cotton,  wool,  linen,  and  silk  in  England  there  were  employed 
4800  boys  and  5308  girls  below  11  years  of  age,  67,000  boys  and  89,000  girLi 
between  11  and  18  years  of  age,  and  88,000  men  and  102,000  women  above 
18  years  ;  a  total  of  159,000  boys  and  men  against  196,000  girls  and  women. 

1  J.  B.  Say,  De,  I'Angleterre  et  des  Anglais,  in  (Euvres,  vol.  iv,  p.  213. 

*  Villerm6's  report  in  M&moires  de  VAcadimie  des  Science*  muralet,  vol.  iif 


172       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

into  the  state  of  the  cotton  industry  in  1828,  the  Mulhouse  masters 
expressed  their  belief  that  the  growing  generation  was  gradually 
becoming  enervated  under  the  influence  of  the  exhaustive  toil  of  a 
day  of  thirteen  or  fifteen  hours.1  The  Bulletin  of  the  Industrial 
Society  of  Mulhouse  of  the  same  year  states  that  in  Alsace,  among 
other  places,  the  general  working  day  averaged  from  fifteen  to 
sixteen  hours,  and  sometimes  extended  even  to  seventeen  hours.2 
And  all  evidence  goes  to  show  that  things  were  equally  bad,  if  not 
worse,  in  other  industrial  towns.3 

Crises  supplied  phenomena  no  less  disquieting  than  the  sufferings 
of  the  proletariat.  In  1815  a  first  crisis  shook  the  English  market, 
throwing  a  number  of  workmen  on  to  the  street  and  resulting  in 
riots  and  machine- breaking.  It  arose  from  an  error  of  the  English 
manufacturers,  who  during  the  war  period  had  been  forced  to 
accumulate  the  stocks  which  they  could  not  export,  so  that  on  the 
return  of  peace  their  supplies  far  exceeded  the  demands  of  the 
Continent.  In  1818  a  new  commercial  panic,  followed  by  fresh 
riots,  again  paralysed  the  English  market.  In  1825  a  third  and  more 
serious  crisis,  begot  probably  of  the  extensive  credit  given  to  the 
newly  opened  markets  of  South  America,  caused  the  failure  of  about 
seventy  English  provincial  banks,  bringing  much  ruin  in  its  train, 
as  well  as  a  shock  to  several  neighbouring  countries.  During  the 
whole  of  the  nineteenth  century  similar  phenomena  have  recurred 
with  striking  regularity,  involving  ruin  to  ever- widening  areas,  as 
production  on  a  large  scale  has  extended  its  sway.  No  wonder  some 
people  were  driven  to  inquire  whether  the  economic  system  beneath 
all  its  superficial  grandeur  did  not  conceal  some  lurking  flaw  or 
whether  these  successive  shocks  were  merely  the  ransom  of  industrial 
progress. 

Poverty  and  economic  crises  were  the  two  new  facts  that  attracted 
immediate  attention  in  those  countries  where  economic  liberty  had 
secured  its  earliest  triumphs ;  and  no  longer  could  attention  be 
diverted  from  them.  Henceforth  they  were  incessantly  employed 
by  writers  of  the  most  various  schools  as  weapons  against  the  new 
regime.  In  many  minds  they  gradually  engendered  a  want  of 

p.  414,  note.  Villerme's  observations  were  made  in  1835  and  1836,  although 
his  celebrated  work,  Tableau  de  I' Slat  physique  et  moral  des  Ouvriers,  was  not 
published  till  1840.  This  book  is  a  reproduction  of  his  report  to  the  Academy. 

1  Enquite  sur  V Industrie  du  Colon,  1829,  p.  87.  Evidence  of  Messrs.  Witz  and 
Son,  manufacturers. 

1  Vide  Bulletin  de  la  Societe,  etc.,  1828,  p.  326-329. 

*  Of.  Rist,  Duree  du  Travail  dans  V Industrie  fran^aise  de  1820  a  1870,  in  tho 
Revue  d' Economic  volitt-que,  1897,  pp.  371  et  seq. 


AIM  AND  METHOD  OF  POLITICAL  ECONOMY     173 

confidence  in  the  doctrines  of  Adam  Smith.  With  some  philanthropic 
and  Christian  writers  they  provoked  sentimental  indignation  and 
aroused  the  vehement  protest  of  humanity  against  an  implacable 
industrialism  which  was  the  source  of  so  much  misery  and  ruin. 
With  others,  especially  with  the  socialists,  who  pushed  criticism  to 
much  greater  lengths,  even  to  an  examination  of  the  institution  of 
private  property  itself,  they  resulted  in  a  demand  for  the  complete 
overthrow  of  society.  All  critics  whatsoever  rejected  the  idea  of  a 
spontaneous  harmony  between  private  and  public  interests  as  being 
incompatible  with  the  circumstances  which  we  have  just  mentioned. 
Among  such  writers  no  one  has  upheld  the  testimony  of  these 
facts  more  strongly  than  Sismondi.1  All  his  interest  in  political 
economy,  so  far  as  theory  was  concerned,  was  summed  up  in  the 
explanation  of  crises,  so  far  as  practice,  in  the  amelioration  of  the 
condition  of  the  workers.  No  one  has  sought  the  explanation  or 
striven  for  the  remedy  with  greater  sincerity.  He  is  thus  the  chief 
of  a  line  of  economists  whose  works  never  ceased  to  exercise  influence 
throughout  the  whole  of  the  nineteenth  century,  and  who,  without 
being  socialists  on  the  one  hand  or  totally  blind  to  the  vices  of 
laissez-faire  on  the  other,  sought  that  happy  mean  which  permits 
of  the  correction  of  the  abuses  of  liberty  while  retaining  the  prin- 
ciple. The  first  to  give  sentiment  a  prominent  place  in  his  theory, 
his  work  aroused  considerable  enthusiasm  at  the  time,  but  was 
subjected  to  much  criticism  at  a  later  period. 


I  :  THE  AIM  AND  METHOD  OF  POLITICAL  ECONOMY 

SISMONDI  began  his  career  as  an  ardent  supporter  of  economic 
Liberalism.  In  1803,  the  year  that  witnessed  the  production  of 
Say's  treatise,  he  published  an  exposition  of  the  ideas  of  Adam 
Smith  in  a  book  entitled  La  Richesse  commerciale,  a  volume  which 
achieved  a  certain  measure  of  success.  During  the  following  years 
he  devoted  himself  to  work  exclusively  historical,  literary,  or 
political,  and  he  only  returned  to  the  study  of  political  economy 
in  1818.  "  At  this  period,"  he  writes,  "  I  was  keenly  interested  in 
the  commercial  crises  which  Europe  had  experienced  during  the 

1  Sismondi  was  a  native  of  Geneva.  His  family  was  originally  Italian,  but 
took  refuge  in  France  in  the  sixteenth  century,  and  migrated  to  Geneva  after 
the  Revocation  of  the  Edict  of  Nantes.  Here  Sismondi  was  born  in  1773.  He 
is  even  better  known  for  his  two  great  works  UHistoire  des  Ripubliques  italiennei 
and  L'Histoire  des  Fraryaia  than  for  his  economic  studies.  He  was  a  frequent 
guest  of  Mme.  de  Stael  at  the  Chateau  Coppet,  and  among  the  other  viaitors 
whom  he  met  there  was  Robert  Owen.  He  died  in  1842. 


174       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

past  years,  and  in  the  cruel  sufferings  of  the  factory  hands,  which 
I  myself  had  witnessed  in  Italy,  Switzerland,  and  France  ;  and  which, 
according  to  public  reports,  were  at  least  equally  bad  in  England, 
Belgium,  and  Germany."  1  It  was  at  this  moment  that  he  was  asked 
to  write  an  article  on  political  economy  for  the  Edinburgh  Encyclo- 
paedia. Upon  a  re- examination  of  his  ideas  in  the  light  of  these  new 
facts  he  found  to  his  surprise  that  his  conclusions  differed  entirely 
from  those  of  Adam  Smith.  In  1819  he  travelled  in  England, 
"  that  wonderful  country,  which  seems  to  have  undergone  a  great 
experience  in  order  to  teach  the  rest  of  the  world."  2  This  seemed 
to  confirm  his  first  impressions.  He  took  the  article  which  he  had 
contributed  to  the  Encyclopaedia  and  developed  it.  From  this  work 
sprang  the  treatise  which  appeared  in  1819  under  the  significant 
title  of  Nouveaux  Principes  d'ficonomie  politique  and  made  him 
celebrated  as  an  economist.  His  path  was  already  clear.  His 
want  of  agreement  with  the  predominant  school  in  France  and 
England  was  further  emphasised  by  the  appearance  of  his  studies 
in  economics, s  in  which  he  illustrates  and  confirms  the  ideas  already 
expounded  in  the  Nouveaux  Principes  by  means  of  a  great  number 
of  descriptive  and  historical  studies  bearing  more  especially  upon 
the  condition  of  the  agriculturists  in  England,  Scotland,  Ireland, 
and  Italy. 

Sismondi's  disagreement  was  not  upon  the  theoretical  principles 
of  political  economy.  So  far  as  these  were  concerned  he  declared 
himself  a  disciple  of  Adam  Smith.4  He  merely  disagreed  with  the 
method,  the  aim,  and  the  practical  conclusions  of  the  Classical 
school.  We  will  examine  his  arguments  on  each  of  these  points. 

First  of  all  as  regards  method.  He  draws  an  important  distinc- 
tion between  Smith  and  his  followers,  Ricardo  and  J.  B.  Say. 
"  Smith,"  says  he,  "  attempted  to  study  every  fact  in  the  light  of 
its  own  social  environment,"  and  "  his  immortal  work  is,  indeed, 
the  outcome  of  a  philosophic  study  of  the  history  of  mankind."  6 

1  Nouveaux  Principes,  vol.  ii,  p.  xxii.  Our  quotations  are  taken  from  the 
second  edition,  published  in  1827. 

1  Ibid.,  p.  iv. 

»  Two  volumes,  Paris,  1837  and  1838. 

*  Nouveaux  Principes,  vol.  ii,  pp.  50-51.  "Adam  Smith's  doctrine  is  also 
ours,  but  the  practical  conclusion  which  we  draw  from  the  doctrine  borrowed  from 
him  frequently  appears  to  us  to  be  diametrically  opposed  to  his." 

8  Ibid.,  p.  56.  "Adam  Smith  recognised  the  fact  that  the  science  of  govern- 
ment was  largely  experimental,  that  its  real  foundation  lay  in  the  history  of 
various  peoples,  and  that  it  is  only  by  a  judicious  observation  of  facts  that  we  can 
deduce  the  general  principles.  His  immortal  work  is,  indeed,  the  outcome  of  a 
philosophic  study  of  the  history  of  mankind."  Cf.  abo  vol.  i,  pp.  47,  389. 


AIM  AND  METHOD  OF  POLITICAL  ECONOMY      175 

Towards  Ricardo,  who  is  accused  of  having  introduced  the  abstract 
method  into  the  science,  his  attitude  is  quite  different,  and  much  as 
he  admired  Malthus,  who,  "  possessed  of  a  singularly  forceful  and 
penetrative  mind,  had  cultivated  the  habit  of  a  conscientious  study 
of  facts,"  *  still  his  spirit  shrank  from  admitting  those  abstractions 
which  Ricardo  and  his  disciples  demanded  from  him.1  Political 
economy,  he  thought,  was  best  treated  as  a  "  moral  science  where  all 
facts  are  interwoven  and  where  a  false  step  is  taken  whenever 
one  single  fact  is  isolated  and  attention  is  concentrated  upon 
it  alone." 8  The  science  was  to  be  based  on  experience,  upon 
history  and  observation.  Human  conditions  were  to  be  studied 
in  detail.  Allowance  was  to  be  made  for  the  period  in  which  a  man 
lived,  the  country  he  inhabited,  and  the  profession  he  followed, 
if  the  individual  was  to  be  clearly  visualised  and  the  influence 
of  economic  institutions  upon  him  successfully  traced.  "  I  am 
convinced,"  says  he,  *'  that  serious  mistakes  have  ensued  from 
the  too  frequent  generalisations  which  have  been  made  in  social 
science."  * 

This  criticism  was  levelled  not  only  at  Ricardo  and  McCulloch, 
but  it  also  included  J.  B.  Say  within  its  purview,  for  Say  had  treated 
jx>litical  economy  as  an  exposition  of  a  few  general  principles.  It 
also  prepared  the  way  for  that  conception  of  political  economy 
upon  the  discovery  of  which  the  German  Historical  school  so  prided 
itself  at  a  later  date.  Sismondi,  himself  an  historian  and  a  publicist 
interested  in  immediate  reforms,  could  not  fail  to  see  quite  clearly 
the  effects  that  social  institutions  and  political  organisation  were 
bound  to  have  upon  economic  prosperity.  A  good  illustration  of 
his  method  is  furnished  by  his  treatment  of  the  probable  effects  of 
a  complete  abolition  of  the  English  Corn  Laws.  The  question,  he 
remarks,  could  not  be  decided  by  theoretical  arguments  alone 
without  taking  some  account  of  the  various  methods  of  cultivating 
the  soil.  A  country  of  tenant  farmers  such  as  England  would  find  it 
difficult  to  meet  the  competition  of  feudal  countries  such  as  Poland 

1  Nouveaux  Principes,  vol.  ii,  p.  268.     Cf.  also  pp.  388,  389. 

*  Ibid.,  p.  56.    In  several  other  passages  he  takes  Ricardo  to  task  (vol.  i, 
pp.- 257,  300,  336,  366,  423 ;  vol.  ii,  pp.  184,  190,  218,  329). 

•  Ibid.,  p.  86. 

4  Etudes  sur  Economic  politique,  preface,  p.  v.  Already  in  his  first  work, 
La  Richesse  commerciale,  he  had  declared  :  "  Political  economy  is  based  upon 
the  study  of  man  or  of  men.  We  must  know  human  nature,  the  character  and 
destiny  of  nations  in  different  places  and  at  different  times.  We  must  consult 
Historians,  question  travellers,  etc.  .  .  .  The  philosophy  of  history  .  .  .  the 
study  of  travels,  etc.,  arc  parallel  studies." 


176       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

or  Russia,  where  corn  only  costs  the  proprietor  "  a  few  hundred 
lashes  judiciously  bestowed  upon  the  peasants."  J 

Sismondi's  conception  of  economic  method  is  incontestably 
just  so  long  as  the  economist  confines  himself  to  the  discussion  of 
practical  problems  or  attempts  to  gauge  the  probable  effects  of  a 
particular  legislative  reform  or  is  unravelling  the  causes  of  a  par- 
ticular event.  But  should  the  economist  wish  to  picture  to  himself 
the  general  aspect  of  the  economic  world,  he  cannot  afford  to  neglect 
the  abstract  method,  and  Sismondi  himself  was  forced  to  have 
recourse  to  it.  It  is  true  that  he  used  it  with  considerable  awkward- 
ness, and  his  failure  to  construct  or  to  discuss  abstract  theories 
perhaps  explains  his  preference  for  the  other  method.  At  any  rate 
it  does  partly  explain  the  keen  opposition  which  his  book  aroused 
among  the  partisans  of  what  he  was  the  first  to  call  by  the  happy  title 
of  the  "  Orthodox  "  school. 

But  to  imagine  anything  more  confused  than  the  reasonings 
by  which  he  attempts  to  demonstrate  the  possibility  of  a  general 
crisis  of  over-production  is  difficult.2  For  his  point  of  departure  he 
takes  the  distinction  between  the  annual  revenue  and  the  annual 
production  of  a  country.  According  to  him  the  revenue  of  one 
year  pays  for  the  production  of  the  following.3  Accordingly,  if  the 
production  of  any  one  year  exceeds  the  revenue  of  the  previous  year 
a  portion  of  the  produce  will  remain  unsold  and  producers  will  be 
ruined.  Sismondi  reasons  as  if  the  nation  were  composed  of  agri- 

1  Nouveaux  Principes,  vol.  i,  p.  257. 

*  Sismondi's  awkwardness  in  the  manipulation  of  abstract  reasoning  is 
clearly  visible  in  a  host  of  other  passages,  especially  in  the  vagueness  of  his 
definitions.  Labour  in  one  place  is  defined  as  the  source  of  all  revenues  (ibid,, 
vol.  i,  p.  85) ;  elsewhere,  as  the  workers'  revenue  as  contrasted  with  interest  and 
rent  (vol.  i,  pp.  96,  101,  110,  113,  114;  vol.  ii,  p.  257,  etc.).  He  never  distin- 
guishes between  national  and  private  capital,  and  wages  are  sometimes  treated 
as  capital,  sometimes  as  revenue  (p.  379).  He  constantly  uses  such  vague  terms 
as  "  rich  "  and  "  poor  "  to  designate  capitalist  and  worker  (vol.  ii,  chap.  5).  In 
his  explanation  of  how  the  rate  of  interest  is  fixed  he  says  that  the  strength  of 
the  lenders  of  capital  just  balances  the  strength  of  the  borrowers,  and,  as  in  all 
other  markets,  they  hit  upon  a  proportional  mean  (vol.  ii,  p.  36).  In  a  similar 
fashion  he  is  constantly  confusing  revenue  in  kind  with  money  revenue. 

1  "  Last  year's  revenue  pays  for  the  production  of  this."  (Ibid.,  vol.  i, 
p.  120.)  Farther  on  he  adds :  "  After  all,  what  we  do  is  to  exchange  the 
total  product  of  this  year  against  the  total  product  of  the  preceding  one  "  (p.  121 ). 
Sismondi  attached  great  importance  to  the  distinction  between  the  national 
revenue  and  the  annual  product.  "  The  confusion  of  the  annual  revenue  with 
the  annual  product  casts  a  thick  veil  over  the  whole  science.  On  the  other  hand, 
all  becomes  clear  and  facts  fall  in  with  the  theory  as  soon  as  one  is  separated  from 
the  other."  (Ibid.,  pp.  366-367.)  It  is  he  himself,  on  the  contrary,  who  creates 
the  confusion. 


AIM  AND  METHOD  OF  POLITICAL  ECONOMY        177 

culturists  who  buy  the  manufactured  goods  they  need  with  the 
revenue  received  from  the  sale  of  the  present  year's  crop.  Conse- 
quently if  manufactured  products  are  superabundant,  the  agri- 
cultural revenue  will  not  be  enough  to  pay  a  sufficient  price. 

But  within  the  argument  there  lurks  a  twofold  confusion.  At 
bottom  a  nation's  annual  revenue  is  its  annual  produce,  and  the  one 
cannot  be  less  than  the  other.  Moreover,  it  is  not  the  produce  of  two 
different  years  that  is  exchanged,  but  the  various  products  of  the 
same  year,  or  rather  (for  this  subdivision  of  the  movements  of  the 
economic  world  into  annual  periods  has  no  counterpart  in  actual 
life)  it  is  the  different  products  created  at  every  moment  that  are 
being  continually  exchanged,  thus  constituting  a  reciprocal  demand 
for  one  another.  At  any  one  moment  there  may  be  too  many  or 
too  few  products  of  a  certain  kind,  resulting  in  a  severe  crisis  in  one 
or  more  industries.  But  of  every  product,  at  one  and  the  same 
time,  there  can  never  be  too  much.  McCulloch,  Ricardo,  and  Say 
victoriously  upheld  this  view  against  Sismondi.1 

It  is  not  only  on  the  question  of  method,  but  still  more  on  the 
question  of  aim,  that  Sismondi  finds  himself  in  opposition  to  the 
Classical  school.  To  them  political  economy  was  the  science 
of  wealth,  or  chrematistics,  as  Aristotle  called  it.  But  the  real  object 
of  the  science  should  be  man,  or  at  least  the  physical  well-being  of 
man.  To  consider  wealth  by  itself  and  to  forget  man  was  a  sure 
way  of  making  a  false  start.2  This  is  why  he  gave  such  prominence 
to  a  theory  of  distribution  alongside  of  the  theory  of  production, 
which  had  received  the  exclusive  attention  of  the  Classical  writers. 
The  Classical  school,  it  is  true,  might  have  retorted  that  they  gave 
first  place  to  production  because  the  multiplication  of  products 

1  McCulloch  criticised  Sismondi  in  an  article  in  the  Edinburgh  Review  of 
October  1819.  For  J.  B.  Say  see  pp.  115-117. 

With  regard  to  Ricardo,  Sismondi  relates  that  in  the  very  year  of  his  death  he 
had  two  or  three  conversations  with  him  on  this  subject  at  Geneva.  In  the  end 
he  seems  to  have  accepted  Ricardo's  point  of  view,  but  not  without  several 
reservations.  "  We  arrive  then  at  Ricardo's  conclusion  and  find  that  when 
circulation  is  complete  (and  having  nowhere  been  arrested)  production  does 
give  rise  to  consumption  "  ;  but  he  adds  :  "  This  involves  making  an  abstraction  of 
time  and  place,  and  of  all  those  obstacles  which  might  arrest  this  circulation." 

Sismondi  defended  his  point  of  view  against  his  three  critics  in  two  articles 
reprinted  at  the  end  of  the  second  edition  of  the  Nouveaux  Principe*. 

1  "  The  accumulation  of  wealth  in  abstracto  is  not  the  aim  of  government,  but 
the  participation  by  all  its  citizens  in  the  pleasures  of  life  which  the  wealth  repre- 
sents. Wealth  and  population  in  the  abstract  are  no  indication  of  a  country'^ 
prosperity :  they  must  in  some  way  be  rented  to  one  another  before  being 
employed  as  the  basis  of  comparison."  (Nouveaux  Principe*,  voL  i,  p.  9.) 


178       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

was  a  sine  qua  non  of  all  progress  in  distribution.  But  Sismondi 
regarded  it  otherwise.  Wealth  only  deserves  the  name  when  it  is 
proportionately  distributed.  He  could  not  conceive  of  an  abstract 
treatment  of  distribution,  and  consequently  could  not  appreciate  it. 
In  his  own  treatment  of  distribution  he  devoted  a  special  section  to 
the  "  poor,"  who  live  by  their  labour  and  toil  from  morn  till  eve  in 
field  or  workshop.  They  form  the  bulk  of  our  population,  and  the 
changes  wrought  in  their  way  of  life  by  the  invention  of  machinery, 
the  freedom  of  competition,  and  the  regime  of  private  property  was 
what  interested  him  most.  "  Political  economy  at  its  widest," 
he  says,  "  is  a  theory  of  charity,  and  any  theory  that  upon  last 
analysis  has  not  the  result  of  increasing  the  happiness  of  mankind 
does  not  belong  to  the  science  at  all."  l 

What  really  interested  Sismondi  was  not  so  much  what  is  called 
political  economy,  but  what  has  since  become  known  as  economic 
soeiale  in  France  and  Sozialpolitik  in  Germany.  His  originality, 
so  far  as  the  history  of  doctrines  is  concerned,  consisted  in  his  having 
originated  this  study.  J.  B.  Say  scorned  his  definitions,  so  different 
were  they  from  his  own.  "  M.  de  Sismondi  refers  to  political 
economy  as  the  science  charged  with  guarding  the  happiness  of 
mankind.  What  he  wishes  to  say  is  that  it  is  the  science  a  know- 
ledge of  which  ought  to  be  possessed  by  all  those  who  are  concerned 
with  human  welfare.  Rulers  who  wish  to  be  worthy  of  their  positions 
ought  to  be  acquainted  with  the  study,  but  the  happiness  of  mankind 
would  be  much  jeopardised  if,  instead  of  trusting  to  the  intelligence 
and  industry  of  the  ordinary  citizen,  we  trusted  to  governments."  2 
And  he  adds  :  "  The  greater  number  of  German  writers,  by  following 
the  false  notions  spread  by  the  Colbertian  system,  have  come  to 
regard  political  economy  as  being  purely  a  science  of  administra- 
tion." 


II  :  SISMONDI'S  CRITICISM  OF  OVER-PRODUCTION 
AND  COMPETITION 

DECEIVED  as  to  the  best  method  to  follow,  mistaken  in  its 
conception  of  the  nature  of  the  object  to  be  kept  in  view,  it  is  not 
surprising  that  the  "  Chrematistic  school  "  should  have  gone  astray 
in  its  practical  conclusions.  The  teaching  of  the  school  gave  an 

1  Nouveaux  Principes,  vol.  ii,  p.  250.  Elsewhere  he  adds :  "  Should  the 
Government  ever  propose  to  further  the  interests  of  one  class  at  the  expense  of 
another  that  class  should  certainly  be  the  workers."  (Ibid,,  vol.  i,  p.  372.) 

*  Court  complel,  vol.  ii,  p.  551. 


OVER-PRODUCTION  AND  COMPETITION  179 

undoubted  incentive  to  unlimited  production,  for  it  was  loud  in  its 
praise  of  free  competition.  It  preached  the  doctrine  of  harmony  of 
interests,  and  considered  that  the  best  form  of  government  was  no 
government  at  all.  These  were  the  three  essential  points  to  which 
Sismondi  took  exception. 

First  as  regards  its  immoderate  enthusiasm  for  production. 
According  to  the  Classical  writers,  the  general  growth  of  pro- 
duction presented  no  inconvenience,  thanks  to  that  spontaneous 
mechanism  which  immediately  corrected  the  errors  of  the  entrepreneur 
if  he  in  any  way  under-estimated  the  necessities  of  demand.  Fall- 
ing prices  warned  him  against  a  false  step  and  influenced  him  in 
directing  his  efforts  towards  other  ends.  In  a  similar  way  rising 
prices  proved  to  the  producers  that  supplies  were  insufficient  and 
that  more  must  be  manufactured.  Hence  the  evils  committed 
would  always  be  momentary  and  transient. 

To  this  Sismondi  replied  :  If  instead  of  reasoning  in  this  abstract 
fashion  economists  had  considered  the  facts  in  detail,  if  instead  of 
paying  attention  to  products  they  had  shown  some  regard  for  man, 
they  would  not  have  so  lightheartedly  supported  the  producers  in 
their  errors.  An  increased  supply,  if  supply  were  already  insufficient 
to  meet  a  growing  demand,  would  injure  no  one,  but  would  be 
profitable  for  all.  That  is  true.  But  the  restriction  of  an  over- 
abundant supply  when  the  needs  grow  at  a  less  rapid  rate  is  not  so 
easily  accomplished.  Does  anyone  think  that  capital  and  labour 
could  on  the  morrow,  so  to  speak,  leave  a  declining  industry  in  order 
to  engage  in  another  ?  The  worker  cannot  quickly  leave  the  work 
he  lives  by,  to  which  he  has  served  a  long  and  costly  apprenticeship, 
and  wherein  he  is  distinguished  for  a  professional  skill  that  will  be 
lost  elsewhere.  Rather  than  consent  to  leave  it,  he  will  let  his  wages 
fall,  he  will  prolong  the  working  day,  remaining  at  work  for  fourteen 
hours,  and  will  toil  during  those  hours  that  would  otherwise  be  spent 
in  pleasure  or  debauchery ;  so  that  the  produce  raised  by  the  same 
number  of  workmen  will  be  very  much  increased.1  As  for  the  manu- 
facturer, he  will  not  be  less  loath  than  the  worker  to  quit  an  industry 
into  the  management  and  construction  of  which  he  has  put  half  or 
even  three-quarters  of  his  fortune.  Fixed  capital  cannot  be  trans- 
ferred from  one  use  to  another,  for  even  the  manufacturer  is  bound  by 
custom — a  moral  force  whose  strength  is  not  easily  calculated.2  Like 
the  worker,  he  is  tied  to  the  industry  which  he  has  created  and  from 
which  he  draws  a  living.  Consequently  production,  far  from  bein£ 

1  Nouveaux  Principet,  vol.  i,  p.  333. 
*  Ibid.,  p.  336. 


180       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

spontaneously  restrained,  will  remain  the  same  or  will  even  perhaps 
tend  to  increase.  In  the  end,  however,  he  must  yield,  and  adaptation 
will  take  place,  but  only  after  much  ruin.  "  Producers  will  not 
withdraw  from  that  industry  entirely,  and  their  numbers  will 
diminish  only  when  some  of  the  workshops  have  failed  and  a  number 
of  workmen  have  died  of  misery."  "Let  us  beware,"  says  he  in 
conclusion,  *'  of  this  dangerous  theory  of  equilibrium  which  is  sup- 
posed to  be  automatically  established.  A  certain  kind  of  equili- 
brium, it  is  true,  is  re-established  in  the  long  run,  but  it  is  only  after  a 
frightful  amount  of  suffering."  J  The  dictum  which  was  to  some 
extent  true  in  Sismondi's  day  controls  the  policy  of  every  trust  and 
Kartel  of  the  present  day. 

Nowadays  production  chiefly  grows  as  the  result  of  the  multipli- 
cation of  machinery,  and  Sismondi's  most  telling  attacks  were 
directed  against  machinery.  Consequently  he  has  been  regarded 
as  a  reactionary  and  treated  as  an  ignoramus,  and  for  half  a  century 
was  refused  a  place  among  the  economists. 

On  the  question  of  machinery  the  Classical  writers  were  unani- 
mous.8 Machinery  they  considered  to  be  very  beneficial,  furnishing 
commodities  at  reduced  rates  and  setting  free  a  portion  of  the  con- 
sumer's revenue,  which  accordingly  meant  an  increased  demand  for 
other  products  and  employment  for  those  dismissed  as  a  result 
of  this  introduction.  Sismondi  does  not  deny  that  theoretically 
equilibrium  is  in  the  long  run  re-established.  "  Every  new  product 
must  in  the  long  run  give  rise  to  some  fresh  consumption.  But  let 
us  examine  things  as  they  really  are.  Let  us  desist  from  our  habit 
of  making  abstraction  of  time  and  place.  Let  us  take  some  account 
of  the  obstacles  and  the  friction  of  the  social  mechanism.  And 
what  do  we  see  ?  The  immediate  effect  of  machinery  is  to  throw 
some  of  the  workers  out  of  employment,  to  increase  the  competition 
of  others,  and  so  to  lower  the  wages  of  all.  This  results  in  diminished 
consumption  and  a  slackening  of  demand.  Far  from  being  always 
beneficial,  machinery  produces  useful  results  only  when  its  intro- 
duction is  preceded  by  an  increased  revenue,  and  consequently  by 
the  possibility  of  giving  new  work  to  those  displaced.  No  one  will 

1  Nouveaux  Principes,  vol.  i,  pp.  220-221. 

*  The  unanimity  is  not  quite  absolute,  however.  Ricardo  in  the  third  edition 
of  his  Principles  added  a  chapter  on  machinery  in  which  he  admitted  that  he  was 
mistaken  in  the  belief  that  machines  after  a  short  period  always  proved  favourable 
to  the  interests  of  the  workers.  He  recognised  that  the  worker  might  suffer, 
for  though  the  machine  increases  the  net  product  of  industry  it  frequently 
diminishes  the  total  product.  He  seemed  to  think  that  this  might  happen 
frequently,  but  in  reality  it  is  quite  exceptional. 


OVER-PRODUCTION  AND  COMPETITION  181 

deny  the  advantage  of  substituting  a  machine  for  a  man,  provided 
that  man  can  obtain  employment  elsewhere."  l 

Neither  Ricardo  nor  Say  denies  this ;  they  affirmed  that  the 
effect  of  machinery  is  just  to  create  some  part  of  this  demand  for 
labour.  But  Sismondi's  argument  is  vitiated  by  the  same  false  idea 
that,  as  we  have  seen  above,  made  him  admit  the  possibility  of 
general  over-production — the  idea  that  increased  production,  if  it  is 
going  to  be  useful,  must  always  be  preceded  by  increased  demand. 
He  was  unwilling  to  admit  that  the  growth  of  production  itself  created 
this  demand.  On  the  other  hand,  what  is  true  in  Sismondi's  attitude 
— and  we  cannot  insist  too  much  on  this — is  the  protest  he  makes 
against  the  indifference  of  the  Classical  school  in  the  face  of  the  evils 
of  these  periods  of  transition. 

The  Classical  school  regarded  the  miseries  created  by  large-scale 
production  with  that  sang-froid  which  was  to  characterise  the  fol- 
lowers of  Marx  amid  the  throes  of  the  "  inevitable  Revolution." 
Among  many  similarities  which  may  be  pointed  out  between  the  writ- 
ings of  Marx  and  the  doctrines  of  the  Classical  school,  this  is  one  of  the 
most  characteristic.  The  grandeur  of  the  new  regime  is  worthy  of  some 
sacrifice.  But  Sismondi  was  an  historian.  His  interest  lay  primarily  in 
those  periods  of  transition  which  formed  the  exit  from  one  regime  and 
the  entrance  into  another,  and  which  involved  so  much  suffering  for 
the  innocent.  He  was  anxious  to  mitigate  the  hardships  in  order  that 
the  process  of  transition  might  be  eased.  Nothing  can  be  more  legiti- 
mate than  a  claim  of  this  kind.  J.  B.  Say  recognised  its  validity  to  a 
certain  extent,  and  this  is  precisely  the  role  of  social  economics. 

1  We  may  here  recall  the  celebrated  winch  argument.  Suppose,  says 
Sismondi,  that  England  succeeded  in  tilling  her  fields  and  doing  all  the  work 
of  her  towns  by  means  of  steam  power,  so  that  her  total  products  and  revenue 
remain  the  same  as  they  are  to-day,  though  her  population  is  only  equal  to  that 
of  the  republic  of  Geneva.  Is  she  to  be  regarded  as  being  richer  and  more 
prosperous  ?  Ricardo  would  reply  in  the  affirmative.  Wealth  is  everything, 
men  nothing.  Really,  then,  a  single  king,  dwelling  alone  on  the  island,  by  merely 
turning  a  winch  might  conceivably  automatically  perform  all  the  work  done  in 
England  to-day.  One  can  only  reply  to  this  argument  by  saying  that  long  before 
arriving  at  this  state  the  community  itself  would  have  devised  some  machinery 
for  distributing  the  product  between  all  its  members.  To  suppose  that  a  portion 
of  the  population  dies  of  hunger  through  want  of  employment  while  the  other  part 
continues  to  manufacture  the  same  quantity  of  goods  as  before  is  sufficiently 
contradictory.  But  at  bottom,  disregarding  the  paradoxical  form  given  it  by 
Sismondi,  the  question  set  by  him  is  insoluble.  What  is  the  best  equilibrium 
between  production  and  population  ?  Are  we  to  prefer  a  population  rapidly 
increasing  in  numbers,  but  making  no  advance  in  wealth,  to  a  population  which 
is  stationary  or  even  decreasing,  but  rapidly  advancing  in  wealth  ?  Everyone  IB 
Jree  to  choose  for  himself.  Science  gives  us  no  criterion. 


182       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

Sismondi  makes  another  remark  which  is  no  less  just.  What  dis- 
gusted him  was  not  merely  that  workmen  should  be  driven  out  by 
machinery,  but  that  the  workers  who  were  retained  only  had  a 
limited  share  of  the  benefits  which  they  procured.1  For  the  Classical 
school  it  was  enough  that  workers  and  consumers  should  have  a  share 
in  the  general  cheapening  of  production.  But  Sismondi  demanded 
more.  So  long  as  toil  is  as  laborious  as  it  is  to-day,  is  it  not  just  that 
the  workman  should  benefit  by  the  introduction  of  machinery  in  the 
way  of  increased  leisure  ?  In  the  social  system  as  at  present  exist- 
ing, owing  to  the  competition  among  workers  as  the  result  of  exces- 
sive population,  machinery  does  not  increase  leisure,  but  it  rather 
strengthens  competition,  diminishes  wages,  provokes  a  more  intense 
effort  on  the  part  of  the  workman,  and  forces  him  to  extend  his 
working  day.  Here  again  Sismondi  appears  correct.  We  cannot 
see  why  the  consumer  alone  should  reap  all  the  profit  of  improved 
machinery,  which  never  benefits  the  workman  unless  it  affects  articles 
which  enter  into  his  consumption.  There  would  be  nothing  very 
striking  if  the  benefits  of  progress,  at  least  during  a  short  time,  were 
to  be  shared  between  consumer  and  worker  just  as  to-day  they  are 
shared  between  inventor,  entrepreneur,  and  society.  This  idea  is  the 
inspiring  motive  of  certain  trade  unions  to-day,  which  only  accept  a 
new  machine  in  exchange  for  less  work  and  more  pay. 

Sismondi's  method  when  applied  to  production  and  machinery 
leads  to  conclusions  very  different  from  those  of  the  Classics.  This 
is  also  true  of  his  treatment  of  competition. 

Adam  Smith  had  written  :  "In  general,  if  any  branch  of  trade, 
or  any  division  of  labour,  be  advantageous  to  the  public,  the  freer 
and  more  general  the  competition  it  will  always  be  the  more  so."  2 
Sismondi  considered  this  doctrine  false,  and  invoked  two  reasons  of 
unequal  value  in  support  of  his  view. 

The  first  is  a  product  of  the  inexact  idea  already  mentioned 

1  "  We  have  said  elsewhere,  but  think  it  essential  to  repeat  it,  that  it  is  not  the 
perfection  of  machinery  that  is  the  real  calamity,  but  the  unjust  distribution 
of  the  goods  produced.  The  more  we  are  able  to  increase  the  quantity  of  goods 
produced  with  a  given  quantity  of  labour,  the  more  ought  we  to  increase  our 
comforts  or  our  leisure.  Were  the  worker  his  own  master,  after  accomplishing 
in  two  hours  with  a  machine  a  task  which  formerly  took  him  twelve  he  would 
then  desist  from  toil,  unless  he  had  some  new  need  or  were  able  to  make  use 
of  a  larger  amount  of  products.  It  is  our  present  organisation  and  the  work- 
man's servitude  that  has  forced  him  to  work  not  less  but  more  hours,  at  the  same 
wage,  and  this  despite  the  fact  that  machinery-  has  increased  his  productive 
powers."  (Nouveaux  Principes,  vol.  ii,  p.  318. )  In  this  passage  we  have  Sismondi's 
real  opinion  on  the  subject  of  machinery  most  clearly  expressed. 

*  Wealth  of  Nations,  Book  II,  chap.  2,  in  fine. 


OVER-PRODUCTION  AND  COMPETITION  183 

above,  which  regards  any  progress  in  production  as  useless  unless 
preceded  by  more  intensive  demand.  Competition  is  beneficial  if 
it  excites  the  entrepreneur  to  multiply  products  in  response  to  an 
increased  demand.  In  the  opposite  case  it  is  bad,  for  if  consumption 
be  stationary,  its  only  effect  will  be  to  enable  the  more  adroit  entre- 
preneur or  the  more  powerful  capitalist  to  ruin  his  rivals  by  means  of 
cheap  sales,  thus  attracting  to  himself  their  clientele,  but  giving  no 
benefit  to  the  public.  This  is  the  spectacle  that  in  reality  is  too  often 
presented  to  us.  The  movements  of  our  captains  of  industry  are 
directed,  not  by  any  concern  for  the  presumed  advantage  of  the 
public,  but  solely  with  a  view  to  increased  profits. 

Sismondi's  argument  is  open  to  the  same  objection  as  was  made 
above.  Cheapened  production  dispenses  with  a  portion  of  the  in- 
come formerly  spent,  and  creates  a  demand  for  other  products,  thus 
repairing  the  evil  it  has  created.  Concentration  of  industry  gives 
to  society  the  same  advantage  as  is  afforded  by  machinery,  and  the 
same  arguments  may  be  used  in  its  defence. 

But  against  competition  Sismondi  directs  a  still  more  serious  argu- 
ment. Pursuit  of  cheapness,  he  remarks,  has  forced  the  entrepreneur  to 
economise  not  only  in  the  matter  of  stuff,  but  also  of  men.  Competi- 
tion has  everywhere  enticed  women  and  children  to  bear  the  burden 
of  production  instead  of  adults.  Certain  entrepreneurs,  in  order  to 
secure  a  maximum  return  from  human  energy,  have  enforced  day 
and  night  toil  with  only  a  scanty  wage  in  return.  What  is  the  use 
of  cheapness  achieved  under  such  circumstances  ?  The  meagre 
advantage  enjoyed  by  the  public  is  more  than  counterbalanced  by 
the  loss  of  vigour  and  health  experienced  by  the  workers.  Competi- 
tion impairs  this  most  precious  capital — the  life-energy  of  the  race. 
He  points  to  the  workmen  of  Grenoble  earning  six  or  eight  sous  for 
a  day  of  fourteen  hours,  children  of  six  and  eight  years  working  for 
twelve  or  fourteen  hours  in  factories  "  in  an  atmosphere  loaded  with 
down  and  dust "  and  perishing  of  consumption  before  attaining  the 
age  of  twenty.  He  concludes  that  the  creation  of  an  unhappy  and 
a  suffering  class  is  too  great  a  price  to  pay  for  an  extension  of 
national  commerce,  and  in  an  oft-quoted  phrase  he  says,  "  The 
earnings  of  an  entrepreneur  sometimes  represent  nothing  but  the 
spoliation  of  the  workmen.  A  profit  is  made  not  because  the 
industry  produces  much  more  than  it  costs,  but  because  it  fails  to 
give  to  the  workman  sufficient  compensation  for  his  toil.  Such  an 
industry  is  a  social  evil."  l 

It  is  futile  to  deny  the  justice  of  the  argument.  When  cheapness 
1  Nouveaux  Principes,  voL  i,  p.  92. 


184       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

is  only  obtained  at  the  cost  of  permanent  deterioration  in  the  health 
of  the  workers,  competition  evidently  is  a  producer  of  evil  rather  than 
of  good.  The  public  interest  is  no  less  concerned  with  the  preserva- 
tion of  vital  wealth  than  it  is  with  facilitating  the  production  of 
material  wealth.  Sismondi  showed  that  competition  was  a  double- 
edged  sword,  and  in  doing  so  he  prepared  the  way  for  those  who  very 
justly  demand  that  the  State  should  place  limits  upon  its  use  and 
prescribe  rules  for  its  employment. 

We  might  be  tempted  to  go  farther  and  see  in  the  passage  just 
cited  an  unreserved  condemnation  of  profits  even.  That  would 
involve  placing  Sismondi  among  the  socialists,  and  this  is  sometimes 
done,  although,  as  we  think,  wrongly. 

In  certain  passages  he  doubtless  expresses  himself  in  a  manner 
similar  to  Owen,  the  Saint-Simonians,  and  Marx.  Thus  in  his  studies 
on  political  economy  we  come  across  phrases  such  as  the  following : 
"  We  might  almost  say  that  modern  society  lives  at  the  expense  of 
the  proletariat,  seeing  that  it  curtails  the  reward  of  his  toil.1  And 
elsewhere  :  "  Spoliation  indeed  we  have,  for  do  we  not  find  the  rich 
robbing  the  poor  ?  They  draw  in  their  revenues  from  the  fertile, 
easily  cultivated  fields  and  wallow  in  their  wealth,  while  the  culti- 
vator who  created  that  revenue  is  dying  of  hunger,  never  allowed 
to  enjoy  any  of  it."  *  We  might  even  say  that  Sismondi  enunciated 
the  theory  of  surplus  value,  which  was  worked  out  by  Marx,  when  he 
makes  use  of  the  term  mieux  value.3  But  the  similarity  is  simply  a 
matter  of  words.  Sismondi,  speaking  of  surplus  value,  means  to 
imply  the  value  that  is  constantly  growing  or  being  created  every 
year  in  a  progressive  country,  not  by  the  effort  of  labour  alone,  but 
by  the  joint  operation  of  capital  and  labour.4  Marx's  idea  that 

1  Etudes  sur  V  Economic  politique,  vol.  i,  p.  35. 

»  Ibid.,  pp.  274-275. 

1  Nouveaux  Principes,  vol.  i,  p.  103. 

*  On  this  point  we  must  dissociate  ourselves  from  the  interpretation  placed 
upon  the  passage  by  M.  Aftalion  in  his  otherwise  excellent  monograph,  L'CSuvre 
economique  de  Simonde  de  Sismondi  (Paris,  1899),  as  well  as  from  the  view  ex- 
pressed by  M.  Denis  (Eistoire  des  Systemes  economiques,  vol.  ii,  p.  306).  But  Sis- 
mondi's  text  appears  to  us  to  leave  no  room  for  doubt.  "  As  against  land  we  might 
combine  the  other  two  sources  of  wealth,  life  which  enables  a  man  to  work  and 
capital  which  employs  him.  These  two  powers  when  united  possess  an  expansive 
characteristic,  so  that  the  labour  which  a  worker  puts  in  his  work  one  year  will 
be  greater  than  that  put  in  the  preceding  year — upon  the  product  of  which  the 
worker  will  have  supported  himself.  It  is  because  of  this  surplus  value  [mieux 
value],  which  increases  as  the  arts  and  sciences  are  progressively  applied  to 
industry,  that  society  obtains  a  constant  increment  of  wealth,"  (Nouveaux 
Principes,  vol.  i,  p.  103.) 


OVER-PRODUCTION    AND    COMPETITION  185 

labour  alone  created  value,  and  that  consequently  profit  and  interest 
constituted  a  theft,  is  entirely  foreign  to  Sismondi.  Sismondi, 
indeed,  recognised  that  the  revenues  of  landed  proprietors  and 
capitalists  were  due  to  efforts  which  they  themselves  had  never  put 
forth.  He  rightly  distinguished  between  the  wages  of  labour  and 
the  revenues  of  proprietors,  but  to  him  the  latter  were  not  less 
legitimate  than  the  former,  for,  says  he,  "  the  beneficiaries  who  enjoy 
such  revenues  without  making  any  corresponding  effort  have  acquired 
a  permanent  claim  to  them  in  virtue  of  toil  undertaken  at  some 
former  period,  which  must  have  increased  the  productivity  of  labour."  x 
When  Sismondi  says  that  the  worker  is  robbed  he  merely  means  to 
say  that  sometimes  the  worker  is  insufficiently  paid  ;  in  other  words, 
that  he  does  not  always  receive  enough  remuneration  to  keep  him 
alive,  and  were  it  only  for  the  sake  of  humanity  that  he  ought 
to  be  better  paid.  But  he  does  not  consider  that  appropriation  by 
proprietors  or  capitalists  of  a  portion  of  the  social  product  is  in 
itself  unjust.2  His  point  of  view  is  not  unlike  that  adopted  at  a 
later  period  by  the  German  socialists  when  they  sought  to  justify 
their  social  policy. 

But  although  Sismondi's  criticism  does  not  amount  to  socialism, 
he  causes  considerable  consternation  among  Liberals  by  the  telling 
manner  in  which  he  shows  the  falsity  of  the  theory  affirmed  by  the 
Physiocrats  and  demonstrated  by  Smith,  namely  the  natural  identity 
of  individual  and  general  interests.  It  is  true  that  Smith  hesitated 
to  apply  it  except  to  production.  But  Sismondi's  peculiar  merit  lies 
in  the  fact  that  he  examined  its  content  in  relation  to  distribution. 
Sismondi  finds  himself  forced  by  mere  examination  of  the  facts  to 
dispute  the  very  basis  of  economic  Liberalism.  Curiously  enough, 
he  seems  surprised  at  his  own  conclusions.  A  priori  the  theory  of 

1  Nouveaux  Principes,  vol.  i,  pp.  111-112.  Cf.  also  p.  87  :  "  Wealth,  however, 
co-operates  with  labour.  And  its  possessor  withholds  from  the  worker  the  part 
which  the  worker  has  produced  beyond  his  cost  of  maintenance — as  compensation 
for  the  help  which  he  has  given  him."  It  is  true  that  this  proportion  is  a  con- 
eiderable  one.  "  The  entrepreneur  is  bound  to  leave  to  the  worker  just  enough  to 
keep  him  alive,  reserving  for  himself  all  that  the  worker  has  produced  over  and 
above  this."  (P.  103.)  But  this  is  not  a  matter  of  necessity — a  deduction  from 
the  laws  of  value,  as  it  is  with  Marx. 

*  "  The  poor  man,  by  his  labour  and  his  respect  for  the  property  of  others, 
acquires  a  right  to  his  home,  to  warm,  proper  clothing,  to  ample  ncur's!  mont 
sufficiently  varied  to  maintain  health  and  strength.  .  .  .  Only  when  all  these 
things  have  been  secured  to  the  poor  as  the  fruit  of  their  labour  does  the  claim 
of  the  rich  come  in.  What  is  superfluous,  after  supplying  the  needs  of  everyone, 
that  should  constitute  the  revenue  of  opulence."  (fitiules  sur  VSconomie  polilique, 
vol.  i,  p.  273.)  Here  we  see  quite  clearly  the  sense  in  which  Sismondi  uses  the 
term  "  spoliation." 

E.D.  f- 


186       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

identity  of  interests  appeared  to  him  true,  for  does  it  not,  in  fact,  rest 
upon  the  two  ideas,  (1)  that  "  each  knows  his  own  interest  better 
than  an  ignorant  or  a  careless  Government  ever  can,"  and  (2)  that 
"  the  sum  of  the  interests  of  each  equals  the  interests  of  all  "  ? 
"  Both  axioms  are  true."  1  Why  then  is  the  conclusion  false  ? 

Here  we  touch  the  central  theme  of  Sismondi's  system,  the 
point  where  he  leaves  the  purely  economic  ground  to  which  the 
Classical  writers  had  stuck  and  approaches  new  territory — the 
question  of  the  distribution  of  property.  Sismondi  discovered  the 
explanation  of  the  contradiction  which  exists  between  private  and 
general  interests  in  the  unequal  distribution  of  property  among 
men  and  the  resulting  unequal  strength  of  the  contracting  parties.2 


Ill  :  THE  DIVORCE  OF  LAND  FROM  LABOUR  AS  THE 
CAUSE  OF  PAUPERISM  AND  OF  CRISES 
SISMONDI  was  the  first  writer  to  give  expression  to  the  belief  that 
industrial  society  tends  to  separate  into  two  absolutely  distinct 
classes — those  who  work  and  those  who  possess,  or,  as  he  often  put 
it,  the  rich  and  the  poor.  Free  competition  hastens  this  separation, 
causing  the  disappearance  of  the  intermediate  ranks  and  leaving  only 
the  proletariat  and  the  capitalist.3  "The  intermediate  classes," 
says  he  somewhere,  "  have  all  disappeared  :  the  small  proprietor  and 
the  peasant  farmer  of  the  plain,  the  master  craftsman,  the  small 
manufacturer,  and  the  village  tradesmen,  all  have  failed  to  withstand 
the  competition  of  those  who  control  great  industries.  Society  no 
longer  has  any  room  save  for  the  great  capitalist  and  his  hireling, 
and  we  are  witnessing  the  frightfully  rapid  growth  of  a  hitherto  un- 
known class — of  men  who  have  absolutely  no  property."  4  "  We 
are  living  under  entirely  new  conditions  of  which  as  yet  we  have  no 

1  Nouveaux  Principes,  vol.  i,  p.  407.     Cf.  also  pp.  200,  201. 

2  "  Everyone's  interest  if  checked  by  everybody  else's  would   in  reality 
represent  the  common  interest.     But  when  everyone  is  seeking  his  own  interest 
at  the  expense  of  others  as  well  as  developing  his  own  means,  it  does  not  always 
happen  that  he  is  opposed  by  equally  powerful  forces.     The  strong  thus  find 
it  their  interest  to  seize  and  the  weak  to  acquiesce,  for  the  least  evil  as  well  as 
the  greatest  good  is  a  part  of  the  aim  of  human  policy."     (Ibid.,  p.  407.)    Cf. 
also  infra,  p.  188,  note  *. 

1  "  There  is  one  fundamental  change  which  is  still  possible  in  society,  amid 
thia  universal  struggle  created  by  competition,  and  that  is  the  introduction  of  the 
proletariat  into  the  ranks  of  human  beings — the  proletariat,  whose  name,  bor- 
rowed from  the  Romans,  is  so  old,  but  who  is  himself  so  new."  (Studes  sur 
rficonomie  politique,  vol.  i,  p.  34.) 

*  Revue  merutueile  d'Economie  politiqiie,  1834,  vol.  ii,  p.  124. 


CAUSE  OF  PAUPERISM  AND  OF  CRISES  187 

experience.  All  property  tends  to  be  divorced  from  every  kind  of 
toil,  and  therein  is  the  sign  of  danger."  l 

This  law  of  the  concentration  of  capital  which  plays  such  an 
important  role  in  the  Marxian  system,  though  true  of  industry,  seems 
hardly  applicable  to  property,  for  a  considerable  concentration  of 
labour  is  not  incompatible  with  a  fairly  even  distribution  of  property. 
It  was  a  memorable  exposition  that  Sismondi  gave  of  this  law, 
showing  how  it  wrought  its  ravages  in  agriculture,  in  industry,  and 
in  commerce  all  at  the  same  time.  "  The  tillage  of  the  34,250,000 
acres  under  cultivation  in  England  was,  in  1831,  accomplished  by 
1,046,982  cultivators,  and  now  it  is  expected  that  the  number  may 
be  still  further  reduced.  Not  only  have  all  the  small  farmers  been 
reduced  to  the  position  of  labourers,  but  a  great  number  of  the  day 
labourers  have  been  forced  to  abandon  field  work  altogether.  The 
industry  of  the  towns  has  adopted  the  principle  of  amalgamation  of 
forces,  and  capital  has  been  added  to  capital  with  a  vigour  greater 
than  that  which  has  joined  field  unto  field.  The  manufacturer  with 
a  capital  of  £1000  was  the  first  to  disappear.  Soon  those  who 
worked  with  £10,000  were  considered  small — too  small.  They 
were  reduced  to  ruin  and  their  places  taken  by  larger  employers. 
To-day  those  who  trade  with  a  capital  of  £100,000  are  considered 
of  an  average  size,  and  the  day  is  not  far  distant  when  these  will 
have  to  face  the  competition  of  manufacturers  with  a  capital  of 
£1,000,000.  The  refining  mills  of  the  Gironde  dispensed  with 
millers  ;  the  cask  mills  of  the  Loire  ruined  the  coopers  ;  the  building 
of  steamboats,  of  diligences,  of  omnibuses  and  railways  with  the  aid 
of  vast  capitals  have  replaced  the  unpretentious  industries  of  the  in- 
dependent boatman,  carriage-  or  wagon-maker.  Wealthy  merchants 
have  entered  the  retail  trade  and  have  opened  their  immense  shops 
in  the  great  capitals,  where,  in  virtue  of  the  improved  means  of 
transit,  they  are  able  to  offer  their  provisions  even  to  consumers  who 
live  at  the  very  extremities  of  the  empire.  They  are  well  on  the 
way  towards  suppressing  the  wholesale  trader  as  well  as  the  retail 
dealer,  and  the  petty  shopkeeper  of  the  provinces.  The  places  of 
these  independent  tradesmen  will  soon  be  taken  over  by  clerks, 
hirelings,  and  proletarians."  2 

And  now  for  the  consequences  of  such  a  condition  of  things.  In 
this  opposition  existing  between  these  two  social  classes  which 
formerly  lived  together  harmoniously  we  shall  find  an  explanation 
of  the  workman's  misery  and  of  economic  crises. 

1  Nouveaux  Principea,  vol.  ii,  p.  434. 

1  Etudes  sur  V  Economic,  politique,  introd.,  pp.  39  ei  seq. 


188       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

The  sufferings  of  workmen,  whence  do  they  spring,  if  not  from  the 
fact  that  their  numbers  are  in  excess  of  the  demand  for  their  labour, 
thus  forcing  them  to  be  content  with  the  first  wage  that  is  offered 
them,  even  though  it  be  opposed  to  their  own  interests  and  the 
interest  of  the  whole  class?1  But  "whence  the  necessity  of  sub- 
mitting to  these  onerous  conditions  and  of  tolerating  a  burden  that 
is  ever  becoming  heavier  under  pain  of  hunger  and  death?  "  The 
explanation  lies  in  the  separation  of  property  and  toil.2  Formerly 
the  workman,  an  independent  artisan,  could  gauge  his  revenue  and 
limit  his  family  accordingly,  for  population  is  always  determined  by 
revenue.3  Robbed  of  his  belongings,  all  his  revenue  is  to-day  got 
from  the  capitalist  who  employs  him.  Ignorant  of  the  future  demand 
for  his  products,  as  well  as  of  the  quantity  of  labour  that  may  be 
necessary,  he  has  no  longer  any  excuse  for  exercising  forethought, 
and  accordingly  he  discards  it.  Population  grows  or  diminishes  in 
accordance  with  the  will  of  the  capitalist.  "  Let  there  be  an  in- 
creased demand  for  labour  and  a  sufficient  wage  offered  it  and  work- 
men will  be  born.  If  the  demand  fails,  the  workmen  will  perish."  * 

This  theory  of  population  and  wages  is  really  Smith's,  who  tried 
to  prove  that  men,  like  commodities,  extended  or  limited  their 
numbers  according  to  the  needs  of  production.  Sismondi,  rather 
than  accept  it  as  a  proof  of  the  harmonious  adaptation  of  demand 

1  "  That  everyone  understands  his  own  interest  better  than  any  Government 
ever  can  is  a  maxim  that  has  been  considerably  emphasised  by  economists.     But 
they  have  too  lightly  affirmed  that  the  interest  of  each  to  avoid  the  greatest  evil 
coincides  with  the  general  interest.     It  is  to  the  interest  of  the  man  who  wishes 
to  impoverish  his  neighbour  to  rob  him,  and  it  may  be  the  latter 's  interest  to 
let  him  do  it  provided  he  can  escape  with  his  life. 

"  But  it  is  not  in  the  interest  of  society  that  the  one  should  exercise  the  force 
and  that  the  other  should 'yield.  The  interest  of  the  day  labourer  undoubtedly 
is  that  the  wages  for  a  day  of  ten  hours  should  be  sufficient  for  his  upkeep  and 
the  upbringing  of  his  children.  It  is  also  the  interest  of  society.  But  the 
interest  of  the  unemployed  is  to  find  bread  at  any  price.  He  will  work  fourteen 
hours  a  day,  will  send  his  children  to  work  in  a  factory  at  ten  years  of  age,  will 
jeopardise  his  own  health  and  life  and  the  very  existence  of  his  own  class  in  order 
to  escape  the  pressure  of  present  need."  (Nouveaux  Principes,  vol.  i,  pp.  200-201.) 

2  Ibid.,  p.  201. 

*  "  Population  will  then  regulate  itself  simply  in  accordance  with  the  revenue. 
Where  it  exceeds  this  proportion  it  is  always  just  because  the  fathers  are  deceived 
as  to  what  they  believe  to  be  their  revenue,  or  rather  because  they  are  deceived 
by  society."    (Ibid.,  p.  254.)    "The  more  the  poor  is  deprived  of  all  right 
of  property  the  greater  is  the  danger  of  its  mistaking  its  revenue  and  con- 
tributing to  the  growth  of  a  population  which,  because  it  does  not  correspond 
to  the  demand   for  labour,  will  never  find   sufficient   means  of  subsistence." 
(Ibid.,  p.  264.) 

•  Ibid.,  p.  286. 


CAUSE  OF  PAUPERISM  AND  OF  CRISES          189 

to  supply,  emphasises  the  lamentable  effects  of  the  separation  of 
wealth  from  labour.1  Smith  and  Sismondi  both  fell  into  the  error  of 
Malthus  and  Ricardo,  who  imagined  that  high  wages  of  necessity 
increased  population.  To-day  facts  seem  to  show  that  a  higher 
standard  of  well-being,  on  the  contrary,  tends  to  limit  it,  and  the 
proletarians,  who  constitute  the  majority  of  the  nation,  can  no 
longer  be  treated  as  mere  tools  in  the  hands  of  the  capitalists,  to  be 
taken  up  or  thrown  aside  according  to  fancy  or  interest. 

What  is  true  of  industrial  employees  is  no  less  true  of  the  toilers 
of  the  field.  In  this  connection  Sismondi  introduces  the  celebrated 
distinction  between  net  and  gross  production  which  has  occupied  the 
attention  of  many  economists  since  then.  If  the  peasants  collectively 
owned  all  the  land  they  would  at  least  of  a  certainty  find  both  the 
security  and  the  support  of  their  life  in  the  soil.  They  would  never 
let  the  gross  produce  fall  below  what  was  sufficient  to  support  them.2 
But  with  great  landed  proprietors,  and  with  the  peasant  transformed 
into  the  agricultural  labourer,  things  have  changed.  The  large 
proprietors  have  the  net  product  only  in  view — that  is,  the  difference 
between  the  cost  of  production  and  the  sale  price.  It  matters  little 
to  them  if  the  gross  produce  is  sacrificed  for  the  sake  of  increasing  the 
net  produce.  Here  you  have  land  which,  when  well  cultivated, 
brings  gross  produce  of  the  value  of  1000  shillings  to  the  farmer  and 
yields  100  shillings  in  rent  to  the  proprietor.  But  the  proprietor 
thinks  that  he  would  gain  110  shillings  if  he  left  it  fallow  or  let  it  as 
unprofitable  pasture.  "  His  gardener  or  vinedresser  is  dismissed, 
but  he  gains  10  shillings  and  the  nation  loses  890.  By  and  by  the 
capital  employed  in  producing  this  plentiful  supply  will  no  longer 
be  so  employed,  and  there  will  be  no  profit.  The  workers  whose 

1  We  note  that  Sismondi  does  not  accept  Malthus'e  theory  of  population.  He 
never  admits  that  population  depends  upon  the  means  of  subsistence  ;  he  holds 
that  it  varies  according  to  the  will  of  the  proprietor,  who  stimulates  or  retards  it 
according  to  his  demand,  but  who  is  interested  in  its  limitation  in  order  to  secure 
for  himself  the  maximum  net  product.  "  Population  has  never  reached  the  limits 
of  possible  subsistence,  and  probably  it  never  will.  But  all  those  who  desire  the 
subsistence  have  neither  the  means  nor  the  right  to  extract  it  from  the  soil. 
Those,  on  the  contrary,  to  whom  the  laws  give  the  monopoly  of  the  land  have 
no  interest  in  obtaining  from  it  all  the  subsistence  it  might  produce.  In  all 
countries  proprietors  are  opposed,  and  must  be  opposed,  to  any  system  of  culti- 
vation which  would  tend  merely  to  multiply  the  means  of  subsistence  while 
not  increasing  the  revenue.  Long  before  being  arrested  by  the  impossibility  of 
finding  a  country  which  produced  more  subsistence  population  would  be  checked 
by  the  impossibility  of  finding  the  people  to  buy  those  means  or  to  work  and 
bring  them  into  being."  (Nouveaux  Principes,  vol.  ii,  pp.  269-270.) 

•  Ibid.,  pp.  263,  264. 


190       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

former  toil  produced  these  products  will  no  longer  be  employed 
and  no  wages  will  be  paid."  1  Examples  are  plentiful  enough.  A 
number  of  the  great  Scotch  proprietors,  in  order  to  replace  the 
ancient  system  of  cultivation  by  the  open  pasture  system,  sent  the 
tenants  from  their  dwellings  and  drove  them  into  the  towns  or 
huddled  them  on  board  ships  for  America.  In  Italy  a  handful  of 
speculators  called  the  Mercantl  di  tenute,  animated  by  similar  motives, 
have  hindered  the  repopulation  and  cultivation  of  the  Roman 
Campagna,  "  that  territory  formerly  so  very  fertile  that  five  acres 
were  sufficient  to  provide  sustenance  for  a  whole  family  as  well  as 
sending  a  recruit  to  the  army.  To-day  its  scattered  homesteads,  its 
villages,  the  whole  population,  together  with  the  farm  enclosures, 
the  vineyards,  and  the  olive  plantations — products  that  require  the 
continual  loving  attention  of  mankind — have  all  disappeared,  giving 
place  to  a  few  flocks  of  sheep  tended  by  a  few  miserable  shepherds."  a 
The  criticism  is  just,  but  is  directed  rather  against  the  abuse  of 
private  property  than  against  the  principle  of  the  net  product,  for 
this  principle  is  incident  to  peasant  proprietorship  as  well.  It  is 
inevitable  wherever  production  for  a  market  takes  place.3 

It  is  just  this  opposition  between  proprietorship  and  labour  that 
supplies  an  explanation  of  economic  crises. 

Sismondi  holds  the  view  that  crises  are  partly  due  to  the  difficulty 
of  acquiring  exact  knowledge  of  a  market  that  has  become  very 
extensive,  and  partly  to  the  fact  that  producers  are  guided  in  their 
actions  by  the  amount  of  their  capital  rather  than  by  the  demand  of 
the  market.4  But  above  all  he  thinks  that  they  are  due  to  the  unequal 
distribution  of  revenues.  The  consequence  of  the  separation  of 

1  Nouveaux  Princiyes,  vol.  i,  p.  153. 

1  Ibid.,  p.  235.  This  problem  of  the  net  and  gross  produce  occupied 
Sismondi's  attention  for  a  long  time.  We  find  a  suggestion  of  it  in  his  first 
work,  Le  Tableau  de  V Agriculture  toscane  (Geneva,  1801),  and  though  he  does 
not  definitely  take  the  side  of  the  gross  produce,  he  shows  some  leanings  that 
way.  "  Why  is  the  gain  of  a  single  rich  fanner  considered  more  profitable  for 
a  State  than  the  miserable  earnings  of  several  thousand  workers  and  peasants  T  " 
The  book,  however,  is  a  treatise  on  practical  agriculture,  and  includes  only  a  few 
economic  dicta.  It  is  here  that  we  have  his  beautiful  description  of  his  farm  at 
Val  Chiuso  (p.  219). 

*  It  is  true  that  Sismondi  wished  to  get  rid  of  the  practice  of  producing 
corn  for  a  market,  so  as  to  free  the  nation's  food  from  the  fluctuations  of  that 
market.  Neither  is  he  over-enthusiastic  in  his  praise  of  the  gross  produce.  He 
recognises  that  the  gradual  growth  of  the  gross  produce  might,  in  its  way,  be  the 
consequence  of  a  state  of  suffering  if  population  were  to  progress  too  rapidly 
(Nouveaux  Principes,  vol.  i,  p.  153).  This  shows  what  a  hesitating  mind  we  are 
dealing  with. 

«  Ibid.,  p.  368. 


CAUSE  OF  PAUPERISM  AND  OF  CRISES  191 

property  from  labour  is  that  the  revenues  of  those  who  possess  lands 
increase  while  the  incomes  of  the  workers  always  remain  strictly  at 
the  minimum.  The  natural  result  is  a  want  of  harmony  in  the 
demand  for  products.  With  property  uniformly  divided  and  with  an 
almost  general  increase  in  the  revenue  there  would  result  a  certain 
degree  of  uniformity  in  the  growth  of  demand.  Those  industries 
which  supply  our  most  essential  and  most  general  wants  would 
experience  a  regular  and  not  an  erratic  expansion.  But  as  a  matter 
of  fact  at  the  present  time  it  is  the  revenue  of  the  wealthy  alone  that 
increases.  Hence  there  is  a  growing  demand  for  the  more  refined 
objects  in  place  of  a  regular  demand  for  the  ordinary  things  of  life  ; 
a  neglect  of  the  more  fundamental  industries,  and  a  demand  for  the 
production  of  luxuries.  If  the  latter  do  not  multiply  quickly 
enough,  then  the  foreigner  will  be  called  in  to  satisfy  the  demand. 
What  is  the  result  of  these  incessant  changes  ?  The  old,  neglected 
industries  are  obliged  to  dismiss  their  workmen,  while  the  new 
industries  can  only  develop  slowly.  During  the  interval  the  work- 
men who  have  suffered  dismissal  are  forced  to  reduce  their  con- 
sumption of  ordinary  goods,  and  permanent  under-consumption, 
attended  by  a  crisis,  immediately  follows.  "  Owing  to  the  concen- 
tration of  wealth  in  the  hands  of  a  few  proprietors,  the  home  market 
is  contracted  and  industry  must  seek  other  outlets  for  its  products 
in  foreign  markets,  where  even  more  considerable  revolutions  are 
possible."  l  Thus  "  the  consumption  of  a  millionaire  master  who 
employs  1000  men  all  earning  but  the  bare  necessities  of  life  is  of 
less  value  to  the  nation  than  a  hundred  men  each  of  whom  is  much 
less  rich  but  who  employ  each  ten  men  who  are  much  less  poor."  2 
Sismondi's  explanation  of  crises,  though  adopted  by  many 
writers  since  then,  is  not  one  of  the  best.  The  difficulty  of  adapta- 
tion would  in  all  probability  not  disappear  even  if  wealth  were  to  be 
more  equally  distributed.  Moreover,  what  he  attempts  to  explain  is  an 
evil  that  is  chronic  in  certain  industries  and  not  the  acute  periodical 
crises.  But  the  theory  has  the  merit  of  attempting  to  explain 

1  Nouveaux  Principes,  vol.  i,  p.  361. 

1  Elsewhere  he  remarks :  "  The  petty  merchants,  the  small  manufacturers, 
disappear,  and  a  great  entrepreneur  replaces  hundreds  of  them  whose  total  wealth 
was  never  equal  to  his.  Taken  altogether,  however,  they  consumed  more  than  he 
does.  His  costly  luxury  gives  much  less  encouragement  to  industry  than  the 
honest  ease  of  the  hundred  homes  which  it  has  replaced."  (Ibid.,  p.  327).  The 
theory  is  more  than  doubtful.  What  we  want  to  know  is  whether  the  demand 
will  remain  the  same  in  amount,  not  whether  there  will  be  no  change  in  its 
character — a  contingency  that  need  not  result  in  a  general  crisis,  but  simply  in  a 
passing  inconvenience. 


192       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

what  still  remains  obscure,  and  what  J.  B.  Say  and  Ricardo  pre- 
ferred to  pass  over  in  silence  or  regarded  as  of  secondary  importance 
under  pretext  that  in  the  long  run  equilibrium  would  always  be 
re-established. 


IV:  SISMONDI'S  REFORM  PROJECTS.     HIS  INFLUENCE 
UPON  THE  HISTORY  OF  DOCTRINES 

THE  principal  interest  of  Sismondi's  book  does  not  lie  in  his 
attempt  to  give  a  scientific  explanation  of  the  facts  that  occupied 
his  attention.  Indeed,  these  attempts  have  little  that  is  altogether 
satisfactory,  for  the  analysis  is  frequently  superficial,  and  even 
commonplace.  His  merit  rather  lies  in  having  placed  in  strong  relief 
certain  facts  that  were  consistently  neglected  by  the  dominant  school 
of  economists.  Taken  as  a  whole,  his  doctrine  must  be  regarded  as 
pessimistic.  He  deliberately  shows  us  the  reverse  of  the  medal,  of 
which  others,  even  those  whom  we  have  classed  as  Pessimists — 
Ricardo  and  Malthus — wished  only  to  see  the  brighter  side.  It  is  no 
longer  possible  to  speak  of  the  spontaneous  harmony  of  interests,  or 
to  forget  the  misery  and  suffering  which  lies  beneath  an  appearance 
of  economic  progress.  Crises  cannot  be  slipped  over  and  treated  as 
transient  phenomena  of  no  great  moment.  No  longer  is  it  possible 
to  forget  the  important  effects  of  an  unequal  division  of  property  and 
revenues,  which  frequently  results  in  putting  the  contracting  parties 
in  a  position  of  fundamental  inequality  that  annuls  freedom  of 
bargaining.  In  a  word,  it  is  no  longer  possible  to  forget  the  social 
consequences  of  economic  transformations.  And  herein  lies  the 
sphere  of  social  politics,  of  which  we  are  now  going  to  speak. 

The  new  point  of  view  occupied  by  Sismondi  enables  him  to 
see  that  the  free  play  of  private  interests  often  involves  injury  to 
the  general  interest,  and  that  the  laissez-faire  doctrine  preached 
by  the  school  of  Adam  Smith  has  no  longer  any  raison  d'etre. 
On  the  contrary,  there  is  room  for  the  intervention  of  society, 
which  should  set' a  limit  to  individual  action  and  correct  its  abuses. 
Sismondi  thus  becomes  the  first  of  the  interventionists. 

State  action,  in  the  first  place,  ought  to  be  employed  in  curbing 
production  and  in  putting  a  drag  upon  the  too  rapid  multiplication 
of  inventions.  Sismondi  dreams  of  progress  accomplished  by  easy 
stages,  injuring  no  one,  limiting,  no  income,  and  not  even  lowering  the 
rate  of  interest.1  His  sensitiveness  made  him  timid,  and  critics  smile 

1  Sismondi  applies  the  same  principles  to  a  consideration  of  a  fall  in  the  rate 
of  interest  as  he  does  to  the  growth  of  production  or  the  increase  of  machinery, 


SISMONDI'S  REFORM  PROJECTS  193 

at  his  philanthropy.  Even  the  Saint-Simonians,  too  sympathetic 
to  certain  of  his  views,  reproach  him  with  having  allowed  himself 
to  be  misled  by  it.1  This  state  of  mind  was  reflected  by  his  habits 
in  private  life.  Sainte-Beuve  2  relates  of  him  how  he  used  to  employ 
an  old  locksmith  who  had  become  so  useless  and  awkward  that  every- 
body had  left  him.  Sismondi  remained  faithful  to  the  old  man  even 
to  the  very  end,  despite  his  inefficiency,  lest  he  should  lose  his  last 
customer.  He  wished  society  to  treat  the  older  industries  in  a 
similar  fashion.  He  has  been  compared  to  Gandalin,  the  sorcerer's 
apprentice  in  the  fable,  who,  having  unlocked  the  water-gate  with  the 
magic  of  his  words,  sees  wave  succeed  wave,  and  the  house  inundated, 
without  ever  being  able  to  find  the  word  which  could  arrest  its  flow. 

Governments  ought  to  temper  their  "  blind  zeal  "  instead  of 
urging  on  production. 3  Addressing  himself  to  the  savants,  he  begs 
them  to  desist  from  invention  and  recall  the  sayings  of  the  econo- 
mists, laissez-faire,  laissez-passer,  by  giving  to  the  generations  which 
their  inventions  render  superfluous  at  least  time  to  pass  away.  For 
the  old  regime,  with  its  corporations  and  wardens,  he  had  the  sincerest 
regard,  while  condemning  them  as  being  harmful  to  the  best  interests 
of  production.  Still  he  wondered  whether  some  lesson  could  not 
be  gleaned  from  them  which  might  help  us  in  fixing  limits  to  the 
abuses  of  competition.  * 

Sismondi  never  seems  to  have  realised  that  any  restriction  placed 
upon  production  with  a  view  to  alleviate  suffering  might  hinder  the 
progress  and  well-being  of  the  very  classes  that  interested  him  most. 
The  conviction  that  the  production  of  Europe  was  enough  to  satisfy 
all  demands  supported  these  erroneous  views.6  Sismondi  never 
suspected  the  relative  poverty  of  industrial  society,  a  fact  that 
struck  J.  B.  Say  very  forcibly.  Moreover,  he  felt  that  on  this  point 
the  policy  of  Governments  was  not  so  easily  modified,  a  feeling  that 
undermined  his  previous  confidence.  v 

Since  the  causes  of  the  evils  at  present  existing  in  society  are 

"  An  increase  of  capital  is  desirable  only  when  its  employment  can  be  increased 
at  the  same  time.  But  whenever  the  rate  of  interest  is  lowered  it  is  a  certain 
sign  that  the  employment  of  capital  has  proportionally  diminished  as  compared 
with  the  amount  available ;  and  this  fall  in  the  rate,  which  is  always  advan- 
tageous to  some  people,  is  disadvantageous  to  others — some  will  have  to  be 
content  with  smaller  incomes  and  others  with  none  at  all."  (Nouveaux  Principes, 
vol.  i,  p.  393.) 

1  Compare  the  Saint-Simonian  review,  Le  Producteur,  vol.  iv,  pp.  887-888. 

1  Nouveaux  Lundis,  vol.  vi,  p.  81. 

*  Etude*  aw  r£conomie  politique,  vol.  i,  pp.  60,  61. 

*  Nouveaux  Principes,  vol.  i,  p.  341  ;  vol.  ii,  p.  459. 

*  Ibid.,  vol.  ii,  pp.  415, 435.     See  also  Eludes,  vol.  i,  p.  25. 

E.D.  o' 


194       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

(1)  the  absence  of  property,  (2)  the  uncertainty  of  the  earnings  of 
the  working  classes,  all  Government  action  ought  to  be  concentrated 
on  these  points. 

The  first  object  to  be  aimed  at,  wherever  possible,  was  the  union 
of  labour  and  property,  and  Sismondi  eulogises  the  movement 
towards  a  new  patriarchal  state — that  is,  towards  a  revival  of 
peasant  proprietorship.  The  Nouveaux  Principes  contains  a  cele- 
brated description  of  the  idyllic  happiness  of  such  a  state.  In 
industry  he  wished  for  a  return  of  the  independent  artisan.  "  I  am 
anxious  that  the  industries  of  the  town  as  well  as  country  pursuits 
should  be  carried  on  by  a  great  number  of  independent  workers  in- 
stead of  being  controlled  by  a  single  chief  who  rules  over  hundreds 
and  even  thousands  of  workers.  I  hope  to  see  manufactures  in  the 
hands  of  a  great  number  of  capitalists  of  average  means,  and  not 
under  the  thumb  of  one  single  individual  who  constitutes  himself 
master  over  millions.  I  long  to  see  the  chance — nay,  even  the 
certainty — of  being  associated  with  the  master  extended  to  every 
industrious  workman,  so  that  when  he  gets  married  he  may  feel  that 
he  has  a  stake  in  the  industry  instead  of  dragging  on  through  the 
declining  years  of  life,  as  he  too  often  does,  without  any  prospect 
of  advancement."  *  This  for  an  end. 

But  the  means  ?  On  this  point  Sismondi  shows  extraordinary 
timidity.  Appeal  to  the  legislator  is  not  followed  up  by  a  plan  of 
campaign,  and  in  moments  of  scepticism  and  despair  he  even  doubts 
whether  reform  is  ever  possible.  He  declares  himself  an  opponent 
of  communism.  He  rejects  the  Utopias  of  Owen,  of  Thompson, 
and  of  Fourier,  although  he  recognises  that  their  aim  was  his  also. 
He  failed  to  perceive  that  his  "  breaking  up  "  process  was  quite  as 
illusory  as  the  communistic  Utopias  which  he  shunned.  He  rejected 
Owen's  system  because  he  saw  the  folly  of  attempting  to  substitute 
the  interest  of  a  corporation  for  that  of  the  individual.  But  he 
never  realised  that  it  had  nothing  to  do  with  a  corporation,  and  it 
is  possible  that  were  he  alive  at  the  present  time  he  would  be  an 
ardent  champion  of  co-operation. 

But  until  the  union  of  property  and  labour  is  realised  Sismondi 
is  content  with  a  demand  for  a  simpler  reform,  which  might  alleviate 
the  more  pressing  sufferings  of  the  working  classes.  First  of  all  he 
appeals  for  the  restoration,  or  rather  the  granting,  of  the  right  of 
combination.2  Then  follows  a  limitation  of  child  labour,  the  aboli- 
tion of  Sunday  toil,  and  a  shortening  of  the  hours  of  labour.3  He 

1  Nouveaux  Principes,  vol.  ii,  pp.  365,  366. 
-  Ibid.,  p.  451.  »  Ibid.,  p.  338. 


SISMONDI'S  REFORM  PROJECTS  195 

also  demanded  the  establishment  of  what  he  called  a  "  professional 
guarantee,"  whereby  the  employer,  whether  agriculturist  or  capitalist, 
would  be  obliged  to  maintain  the  workman  at  his  own  expense  during 
a  period  of  illness  or  of  lock-out  or  old  age.  This  principle  once 
admitted,  the  employers  would  no  longer  have  any  interest  in 
reducing  the  wages  of  the  workman  indefinitely,  or  in  introducing 
machinery  or  in  multiplying  production  unduly.  Having  become 
responsible  for  the  fate  of  the  workers,  they  would  then  take  some 
account  of  the  effect  which  invention  might  have  on  their  well-being, 
whereas  to-day  they  simply  regard  them  from  the  point  of  view  of 
their  own  profits.1  One  might  be  tempted  to  regard  this  as  an  antici- 
pation of  the  great  ideal  which  has  to  a  certain  extent  been  realised 
by  the  social  insurance  Acts  passed  during  the  last  thirty  years.  But 
this  is  only  partly  so.  Sismondi  placed  the  charge  of  maintenance 
upon  the  master  and  not  upon  society,  and  his  criticism  of  methods 
of  relief,  especially  of  the  English  Poor  Law,  was  that  they  tended 
to  decrease  wages  and  to  encourage  the  indifference  of  masters  by 
teaching  the  workers  to  seek  refuge  at  the  hands  of  the  State  rather 
than  at  the  hands  of  the  masters. 

In  short,  his  reform  projects,  like  his  criticism  of  the  economists, 
reveal  a  certain  degree  of  hesitation,  due,  no  doubt,  to  the  perpetual 
conflict  between  reason  and  sentiment.  Too  keen  not  to  see  the 
benefits  of  the  new  industrial  rSgime,  and  too  sensitive  not  to  be 
moved  by  some  of  its  more  painful  consequences,  too  conservative 
and  too  wise  to  hope  for  a  general  overthrow  of  society,  he  is  content 
to  remain  an  astonished  but  grieved  spectator  of  the  helplessness 
of  mankind  in  the  face  of  this  eviL  He  did  not  feel  himself  competent 
to  suggest  a  remedy.  He  himself  has  confessed  to  this  in  touching 
terms  : 

"  I  grant  that,  having  indicated  what  in  my  opinion  is  the  prin- 
ciple of  justice  in  this  matter,  I  do  not  feel  myself  equal  to  the  task 
of  showing  how  it  can  be  realised.  The  present  method  of  distributing 
the  fruits  of  industry  among  those  who  have  co-operated  in  its 
production  appears  to  me  to  be  curious.  But  a  state  of  society 
absolutely  different  from  that  with  which  we  are  now  acquainted 
appears  to  be  beyond  the  wit  of  man  to  devise."  2 

It  is  a  striking  fact  that  most  of  the  important  movements  hi 
the  nineteenth  century  can  be  traced  back  to  Sismondi's  writings. 
He  was  the  first  critic  whom  the  Classical  school  encountered  in  its 
march,  and  he  treats  us  to  a  full  rksumi  of  its  many  heresies.  In  the 

1  Nouveaux  Principes,  vol.  ii,  p.  661.  »  Ibid.,  p.  364. 


196       SlSMONDI   AND    ORIGINS    OF   CRITICAL   SCHOOL 

bitter  struggle  which  ensued  the  heretics  won  the  day,  their  nostrums 
taking  the  place  of  the  Classical  doctrines  in  the  public  favour.  But 
it  seems  hardly  possible  that  Sismondi's  work  should  have  determined 
the  course  of  these  newer  tendencies.  His  immediate  influence  was 
extremely  limited.  It  scarcely  told  at  all  except  upon  the  socialists. 
His  book  was  soon  forgotten,  and  not  until  our  own  day  was  its 
importance  fully  realised.  It  would  be  truer  to  say  that  in  the 
course  of  the  nineteenth  century  there  was  a  spontaneous  revival  of 
interest  in  the  ideas  promulgated  by  Sismondi.  None  the  less  he 
was  the  first  writer  to  raise  his  voice  against  certain  principles 
which  were  rapidly  crystallising  into  dogmas.  He  was  the  earliest 
economist  who  dared  resist  the  conclusions  of  the  dominant  school, 
and  to  point  to  the  existence  of  facts  which  refused  to  tally  with 
the  large  and  simple  generalisations  of  his  predecessors.  If  not  the 
founder  of  the  new  schools  that  were  about  to  appear,  he  was  their 
precursor.  They  are  inspired  by  the  same  feelings  and  welcome 
the  same  ideas.  His  method  is  an  anticipation  of  that  of  the  His- 
torical school.  His  definition  of  political  economy  as  a  philosophy 
of  history l  works  wonders  in  the  hands  of  Roscher,  Knies,  and 
Hildebrand.  His  plea  for  a  closer  observation  of  facts,  his  criticism 
of  the  deductive  process  and  its  hasty  generalisations,  will  find  an 
echo  in  the  writings  of  Le  Play  in  France,  of  Schmoller  in  Germany, 
and  of  Cliffe  Leslie  and  Toynbee  hi  England.  The  founders  of  the 
German  Historical  school,  in  their  ignorance  of  foreign  writers, 
regarded  him  as  a  socialist,2  but  the  younger  representatives  of 
that  school  have  done  full  justice  to  his  memory,  and  recognise  him 
as  one  of  their  earliest  representatives. 

By  his  appeal  to  sentiment  and  his  sympathy  for  the  working 
classes,  by  his  criticism  of  the  industrial  regime  of  machines  and 
competition,  by  his  refusal  to  recognise  personal  interest  as  the  only 
economic  motive,  he  foreshadows  the  violent  reaction  of  humam- 
tarianism  against  the  stern  implacability  of  economic  orthodoxy. 
We  can  almost  hear  the  eloquence  of  Ruskin  and  Carlyle,  and  the 
pleading  of  the  Christian  Socialists,  who  in  the  name  of  Christian 
charity  and  human  solidarity  protest  against  the  social  consequences 
of  production  on  a  large  scale.  Like  Sismondi,  social  Christianity 
will  direct  its  attack,  not  against  the  science  itself,  but  against  the 
easy  bourgeois  complacency  of  its  advocates.  A  charge  of  selfishness 
will  be  brought,  not  against  economic  science  as  such,  but  against  its 
representatives  and  the  particular  form  of  society  which  it  upholds. 

1  See  section  I  of  present  chapter. 

1  Knies,  strangely  enough,  classes  him  with  the  socialists. 


SISMONDI'S  REFORM  PROJECTS  197 

Finally,  by  his  plea  for  State  intervention  Sismondi  inaugurated 
a  reaction  against  Liberal  absolutism,  a  reaction  that  deepened  in 
intensity  and  covered  a  wider  area  as  the  century  wore  on,  and 
which  found  its  final  expression  in  State  socialism,  or  "  the  socialism 
of  the  chair."  He  was  the  first  to  advocate  the  adoption  of  factory 
legislation  in  France  and  to  seek  to  give  the  Government  a  place  in 
directing  economic  affairs.  The  impossibility  of  complete  abdica- 
tion on  the  part  of  the  State  would,  he  thought,  become  clearer  every 
day.  But  it  was  little  more  than  an  aspiration  with  him  ;  it  never 
reached  the  stage  of  a  practical  suggestion. 

Thus  in  three  different  ways  Sismondi's  proposals  were  destined 
to  give  rise  to  three  powerful  currents  of  thought,  and  it  is  not  sur- 
prising that  interest  in  his  work  should  have  grown  with  the  develop- 
ment of  the  new  tendencies  which  he  had  anticipated. 

His  immediate  influence  upon  contemporary  economists  was  very 
slight.  Some  of  them  allowed  themselves  to  be  influenced  by  his 
warmheartedness,  his  tenderness  for  the  weak,  and  his  pity  for  the 
workers,  but  they  never  found  this  a  sufficient  reason  for  breaking  off 
their  connections  with  the  Classical  school.  Blanqui x  in  particular 
was  a  convert  to  the  extent  that  he  admitted  some  exceptions  to  the 
principle  of  laissez-faire.  Theodore  Fix  and  Droz 2  seemed  won  over 
for  a  moment,  and  Sismondi  might  rightly  have  expected  that  the 
Revue  mensuelle  d1  Economic  politique,  started  by  Fix  in  1833,  would 
uphold  his  views.  But  the  days  of  the  Revue  were  exceedingly  few, 
and  before  finally  disappearing  it  had  become  fully  orthodox.  Only 
one  author,  Buret,  in  his  work  on  the  sufferings  of  the  working  classes 
in  England  and  France,8  has  the  courage  to  declare  himself  a  whole- 
hearted disciple  of  Sismondi.  The  name  of  Villeneuve-Bargemont, 
author  of  Economic  politique  chretienne,  must  be  added  to  these. 
His  work,  which  was  published  in  three  volumes  in  1834,  bears 
frequent  traces  of  Sismondi's  influence. 

Sismondi,  though  not  himself  a  socialist,  has  been  much  read  and 

1  A.  Blanqui,  in  his  Histoirc  de  Vficonomie  politique  en  Europe  (1837),  con- 
siders him  a  writer  of  the  modern  school,  which  he  describes  as  follows  :  "  Writers 
of  this  school  are  no  longer  willing  to  treat  production  as  a  pure  abstraction  apart 
from  its  influence  upon  the  workers.  To  produce  wealth  is  not  enough ;  it  must  be 
equitably  distributed."  (Introd.,  3rd  ed.,  p.  xxi.) 

a  Droz  (1773-1850)  published  in  1829  his  Economie  politique,  on  Principes 
de,  la  Science,  des  Richesses.  It  is  in  this  work  that  we  find  the  famous  phrase, 
"  Certain  economists  seem  to  think  that  products  are  not  made  for  men,  but  that 
men  are  made  for  the  products." 

3  Paris,  1841,  two  volumes.  Buret  died  in  1842,  when  thirty -two  years  of 
age. 


198        SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

carefully  studied  by  socialists.  It  is  among  them  that  his  influence  is 
most  marked.  This  is  not  very  surprising,  for  all  the  critical  portion 
of  his  work  is  really  a  vigorous  appeal  against  competition  and  the 
inequalities  of  fortune.  Louis  Blanc  read  him  and  borrowed  from 
him  more  than  one  argument  against  competition.  The  two  German 
socialists  Rodbertus  and  Marx  are  still  more  deeply  indebted  to  him. 
Rodbertus  borrowed  from  him  his  theory  of  crises,  and  owes  him  the 
suggestion  that  social  progress  benefits  only  the  wealthier  classes. 
Rodbertus  quotes  him  without  any  mention  of  his  name,  but  Marx 
in  his  Manifesto  has  rendered  him  full  justice,  pointing  out  all 
that  he  owed  to  his  penetrative  analysis.  The  most  fertile  idea 
borrowed  by  Marx  was  that  which  deals  with  the  concentration  of 
wealth  in  the  hands  of  a  few  powerful  capitalists,  which  results  in 
the  increasing  dependence  of  the  working  classes.  This  concep- 
tion is  the  pivot  of  the  Manifesto,  and  forms  a  part  of  the  very 
foundation  of  Marxian  collectivism.  The  other  idea  of  exploitation 
does  not  seem  to  have  been  borrowed  from  Sismondi,  although  he 
might  have  discovered  a  trace  of  the  surplus  value  theory  in  his 
writings.  Marx  endeavours  to  explain  profit  by  drawing  a  distinc- 
tion between  a  worker  selling  his  labour  and  parting  with  some  of  his 
labour  force.  Sismondi  employs  terms  that  are  almost  identical, 
and  says  that  the  worker  when  selling  his  labour  force  is  giving  his 
life.  Elsewhere  he  speaks  of  a  demand  for  "  labour  force."  Sis- 
mondi never  drew  any  precise  conclusion  from  these  ideas,  but  they 
may  have  suggested  to  Marx  the  thesis  he  took  such  pains  to 
establish. 

Many  a  present-day  socialist,  without  acknowledging  the  fact, 
perhaps  without  knowing  it,  loves  to  repeat  the  arguments  which 
Sismondi  was  the  first  to  employ,  to  stir  up  his  indifferent  con- 
temporaries. 


CHAPTER  II :  SAINT-SIMON,  THE  SAINT- 
SIMONIANS,  AND  THE  BEGINNINGS  OF 
COLLECTIVISM 

SISMONDI,  by  supplementing  the  study  of  political  economy  by 
a  study  of  social  economics,  had  already  much  enlarged  the  area 
traced  for  the  science  by  its  founders.  But  while  giving  distribu- 
tion the  position  of  honour  in  his  discussion,  he  never  dared  carry 
his  criticism  as  far  as  an  examination  of  that  fundamental  institution 
of  modern  society — private  property.  Property,  at  least,  he  thought 


SAINT-SIMON  AND  THE  SAINT-SIMONIANS        199 

legitimate  and  necessary.  Every  English  and  French  economist 
had  always  treated  it  as  a  thing  apart — a  fact  so  indisputable  and 
inevitable  that  it  formed  the  very  basis  of  all  their  speculations. 

Suddenly,  however,  we  come  upon  a  number  of  writers  who,  while 
definitely  rejecting  all  complicity  with  the  earlier  communists  and 
admitting  neither  equality  of  needs  nor  of  faculties,  but  tending  to 
an  agreement  with  the  economists  in  claiming  the  maximum  of 
production  as  the  one  aim  of  economic  organisation,  dare  lay  their 
hands  upon  the  sacred  ark  and  attack  the  institution  of  property 
with  whole-hearted  vigour.  Venturing  upon  what  had  hitherto  been 
holy  ground,  they  displayed  so  much  skill  and  courage  that  every 
idea  and  every  formula  which  became  a  commonplace  of  the  socialistic 
literature  of  the  later  nineteenth  century  already  finds  a  place  in 
their  system.  Having  definite  ideas  as  to  the  end  which  they  had  in 
view,  they  challenged  the  institution  of  private  property  because 
of  its  effects  upon  the  distribution  and  production  of  wealth.  They 
cast  doubt  upon  the  theories  concerning  its  historical  evolution,  and 
concluded  that  its  abolition  would  help  the  perfection  of  the  scientific 
and  industrial  organisation  of  modern  society.  The  problem  of 
private  property  was  at  last  faced,  and  a  recurrence  of  the  discussion 
was  henceforth  to  become  a  feature  of  economic  science.1 

1  It  was  not  intended  that  any  reference  should  be  made  in  this  volume  to 
the  doctrine  of  socialism  before  the  opening  of  the  nineteenth  century,  but  the 
question  whether  the  French  Revolution  of  1789  was  socialist  in  character  or 
simply  middle -class,  as  the  socialists  of  to-day  would  put  it,  has  been  so  frequently 
discussed  that  we  cannot  ignore  it  altogether. 

There  is  no  doubt  that  the  leaders  of  the  Revolution — including  Marat 
even,  who  is  wrongly  regarded  as  a  supporter  of  that  agrarian  law  which  he 
condemned  as  fatal  and  erroneous — always  showed  unfailing  respect  for  the 
institution  of  private  property.  The  confiscation  of  the  property  of  the  Church 
and  of  the  emigre  nobles  was  a  political  and  not  an  economic  measure,  and  in 
that  respect  is  fairly  comparable  with  the  historic  confiscation  of  the  property 
of  Jews,  Templars,  Huguenote,  and  Irish,  which  in  no  case  was  inspired  by  merely 
socialist  motives.  The  confiscation  of  endowments — of  goods  belonging  to  legal 
persons — was  regarded  as  a  means  of  defending  individual  or  real  property  against 
the  encroachments  of  merely  fictitious  persons  and  the  tyranny  of  the  dead  hand. 
When  it  came  to  the  abolition  of  feudal  rights  great  care  was  taken  to  distinguish 
the  tenant's  rights  of  sovereignty,  which  were  about  to  be  abolished,  from  his  pro- 
prietary rights,  which  deserved  the  respect  of  everyone  who  recognised  the  legiti- 
macy of  compensation.  In  practice  the  distinction  proved  of  little  importance. 
Scores  of  people  were  ruined  during  those  unfortunate  months — some  through  mere 
misfortune,  others  because  of  the  muddle  over  the  issue  of  assignats,  and  others, 
ngain,  because  of  the  confiscation  of  rents;  but  the  intention  to  respect  the 
rights  of  property  remains  indisputable  still.  It  would  seem  that  in  this  matter 
the  revolutionary  leaders  had  come  under  the  influence  of  the  Physiocrats,  whose 
cult  of  property  has  already  engaged  our  attention.  And  how  easy  it  would  be  to 


200       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

Not  that  it  had  hitherto  been  neglected.  Utopian  communists 
from  Plato  and  More  up  to  Mably,  Morelly,  Godwin,  and  Babeuf,  the 
eighteenth-century  equalitarians,  all  rest  their  case  upon  a  criticism 
of  property.  But  hitherto  the  question  had  been  treated  from  the 
point  of  view  of  ethics  rather  than  of  economics.1  The  originality 

imagine  a  Physiocrat  penning  Article  17  of  the  Declaration  of  the  Rights  of  Man 
when  it  speaks  of  property  as  an  inviolable,  sacred  right !  But,  on  the  other  hand, 
it  is  true  that  Rousseau  in  his  article  Economic  politique  speaks  of  the  rights  of 
property  as  the  most  sacred  of  the  citizen's  rights. 

It  was  not  only  on  the  question  of  property  that  the  revolutionists  of  1789 
showed  themselves  anti-socialist.  They  were  also  anti-socialist  in  the  sense 
that  they  paid  no  attention  to  class  war  and  ignored  the  antagonism  that  exists 
between  capitalists  and  workers.  All  were  to  be  treated  as  citizens  and  brothers, 
all  were  equal  and  alike. 

However,  those  who  claim  the  most  intimate  connection  with  the  spirit  of  the 
Revolution  remain  undismayed  by  such  considerations.  They  endeavour  to 
show  that  the  Revolution  was  not  quite  so  conservative  nor  so  completely 
individualistic  as  is  generally  supposed,  and  after  diligent  search  they  claim  to 
have  discovered  certain  decrees  bearing  unmistakable  traces  of  socialism.  But 
a  much  more  general  practice  is  to  plead  extenuating  circumstances.  "  Are  we 
to  demand  that  the  social  problems  which  appeared  fifty  years  afterwards,  when 
industry  had  revolutionised  the  relations  of  capital  and  labour,  should  have 
been  solved  at  the  end  of  the  eighteenth  century  ?  It  would  have  been  worse 
than  useless  for  the  men  of  1789  and  1793  to  try  to  regulate  such  things  in 
advance."  (Aulard,  Address  to  Students,  April  21, 1893.  Cf .  his  Histoire  politique 
de  la  Revolution,  chap.  8,  paragraph  entitled  "  Le  Socialism^.") 

We  must  not  lose  sight  of  the  communist  plot  hatched  by  Fran§ois  Babeuf 
during  the  period  of  the  Revolution.  But  in  this  case,  at  any  rate,  the  exception 
proves  the  rule,  for,  despite  the  fact  that  Babeuf  had  assumed  the  suggestive 
name  of  Gaius  Gracchus,  he  found  little  sympathy  among  the  men  of  the  Con- 
rention,  even  in  La  Montagne,  and  he  was  condemned  and  executed  by  order 
of  the  Directory.  Babeuf's  plot  is  interesting,  if  only  as  an  anticipatory 
protest  of  revolutionary  socialism  against  bourgeois  revolution.  Cf.  Aulard, 
loc.  cit.,  p.  627. 

1  Not  to  speak  of  celebrated  Utopians  like  Plato,  More,  and  Campanella,  a 
number  of  writers  who  have  been  minutely  studied  by  Lichtenberger  undertook 
to  supply  such  criticism  in  the  eighteenth  century.  Morelly,  Mably,  Brissot, 
and  Meslier  the  curb  in  France,  and  Godwin  in  England,  attacked  the  institution 
of  property  with  becoming  vigour.  Babeuf,  who  in  1797  suffered  death  for  his 
attempt  to  establish  a  community  of  equals,  has  left  us  a  summary  of  their 
theories.  But  the  Saint-Simonians  owe  them  nothing  in  the  way  of  inspiration. 
Eighteenth-century  socialism  was  essentially  equalitarian.  What  aroused  the 
anger  of  the  eighteenth-century  writers  most  of  all  was  the  inequality  of  pleasure 
and  of  well-being,  for  which  they  held  the  institution  of  private  property  respon- 
sible. "  If  men  have  the  same  needs  and  the  same  faculties  they  ought  to  be 
given  the  same  material  and  the  same  intellectual  opportunities,"  says  the 
Manifeste  des  Sgaux.  But  the  Saint-Simonians  recognise  neither  equality  of 
needs  nor  of  faculties,  and  they  are  particularly  anxious  not  to  be  classed 
along  with  the  Babeuvistes — the  champions  of  the  agrarian  law.  Their 
socialism,  which  is  founded  upon  the  right  to  the  wholo  produce  of  labour 


SAINT-SIMON  AND  THE  SAINT- SIMONIANS    .   201 

of  the  Saint-Simonian  treatment  is  that  it  is  the  direct  outcome 
of  the  economic  and  political  revolution  which  shook  France  and 
the  whole  of  Europe  towards  the  end  of  the  eighteenth  and  the 
beginning  of  the  nineteenth  centuries.  The  socialism  of  Saint-Simon 
is  not  a  vague  aspiration  for  some  pristine  equality  which  was  largely 
a  creation  of  the  imagination.  It  is  rather  the  nai've  expression  of 
juvenile  enthusiasm  in  the  presence  of  the  new  industrial  regime 
begotten  of  mechanical  invention  and  scientific  discovery.  The 
modern  spirit  at  its  best  is  what  it  would  fain  reveal.  It  sought  to 
interpret  the  generous  aspirations  of  the  new  bourgeois  class,  freed 
through  the  instrumentality  of  the  Revolution  from  the  tutelage 
of  baron  and  priest,  and  to  show  how  the  reactionary  policy  of  the 
Restoration  threatened  its  triumph.  Not  content,  however,  with 
confining  itself  to  the  intellectual  orbit  of  the  bourgeoisie,  it  sought 
also  to  define  the  sphere  of  the  workers  in  future  society  and  to  lay 
down  regulations  for  their  benefit.  But  its  appeal  was  chiefly  to 
the  more  cultured  classes — engineers,  bankers,  artists,  and  savants. 
It  was  to  these  men — all  of  them  members  of  the  better  classes — 
that  the  Saint-Simonians  preached  collectivism  and  the  suppression 
of  inheritance  as  the  easiest  way  of  founding  a  new  society  upon 
the  basis  of  science  and  industry.  Hence  the  great  stir  which  the 
new  ideas  caused. 

Consequently  Saint-Simonism  appears  to  be  a  somewhat  unexpected 

and  would  apportion  wages  according  to  capacity,  aims  neither  at  equality  nor 
uniformity. 

The  Sa'int-Simonians  seem  to  have  remained  in  ignorance  of  the  socialist 
theories  of  their  contemporaries,  the  French  Fourier  and  the  English  Thompson 
and  Owen.  Fourier's  work  only  became  known  to  Enfantin  after  his  own 
economic  doctrine  had  been  formulated.  Saint-Simon  and  Bazard  appear  never 
to  have  read  him.  It  is  probable  that  Enfantin  only  became  aware  of  Fourier'a 
writings  after  1829,  and  when  he  did  he  interested  himself  merely  in  those  that 
dealt  with  free  love  and  the  theory  of  passions.  As  Bourgin  put  it :  "If  Fourier 
did  anything  at  all,  he  has  rather  hastened  the  decomposition  of  Saint-Simonism." 
(Henry  Bourgin,  Fourier,  p.  419 ;  Paris,  1905.) 

The  English  socialists  are  never  as  much  as  mentioned.  The  Bicardian 
doctrine  of  labour-value,  which  is  the  basis  of  Thompson's  theory  and  of  Owen's, 
and  later  still  of  that  of  Marx,  seems  never  to  have  become  known  to  them.  "  Ques- 
tions of  value,  price,  and  production,  which  demand  no  fundamental  knowledge 
either  of  the  composition  or  the  organisation  of  society,"  are  treated  as  so  many 
details  (Le  Producteur,  vol.  iv,  p.  388).  Their  doctrine  is  primarily  social,  con- 
taining only  occasional  allusions  to  political  economy.  Enfantin  is  careful  to 
distinguish  between  Quesnay  and  his  school  and  Smith  or  Say.  The  Physiocrat* 
gave  a  social  character  to  their  doctrine,  which  the  economists  wrongfully  neglected 
to  develop.  Aug.  Comte,  in  the  fourth  volume  of  the  Cours  de  Philosophic,  has 
criticised  political  economy  in  almost  identical  terms,  which  affords  an  additional 
proof  of  his  indebtedness  to  Saint-Simonism. 


202       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

extension  of  economic  Liberalism  rather  than  a  tardy  renewal  of 
ancient  socialistic  conceptions. 

We  must,  in  fact,  distinguish  between  two  currents  in  Saint- 
Simonism.  The  one  represents  the  doctrine  preached  by  Saint- 
Simon  himself,  the  other  is  that  of  his  disciples,  the  Saint-Simonians. 
Saint-Simon's  creed  can  best  be  described  as  "  industrialism  "  plus 
a  slight  admixture  of  socialism,  and  it  thus  naturally  links  itself 
with  economic  Liberalism,  of  which  it  is  simply  an  exaggerated 
development.  The  disciples'  doctrine,  on  the  other  hand,  can  only 
be  described  as  collectivism.  But  it  is  a  collectivism  logically 
deduced  from  two  of  the  master's  principles  which  have  been  extended 
and  amplified.  For  a  history  of  economic  ideas  it  is  the  theories 
of  the  disciples  that  matter  most,  perhaps.  But  it  would  be  impos- 
sible to  understand  these  without  knowing  something  of  Saint- 
Simon's  theory.  We  shall  give  an  explanation  of  his  doctrine,  first 
attempting  to  show  the  links  which  surely,  though  strangely  enough, 
affiliate  the  socialism  of  Saint-Simon  with  economic  Liberalism. 


I :  SAINT-SIMON  AND  INDUSTRIALISM 

SAINT-SIMON  was  a  nobleman  who  led  a  somewhat  dissolute, 
adventurous  life.  At  the  early  age  of  sixteen  he  took  part  in  the 
American  War  of  Independence.  The  Revolution  witnessed  the 
abandonment  of  his  claim  to  nobility,  but  by  successful  speculation 
in  national  property  he  was  enabled  to  retrieve  his  fortune  to  some 
extent.  Imprisoned  as  a  suspect  at  Sainte-Pelagie,  set  free  on 
the  9th  Thermidor,  he  attained  a  certain  notoriety  as  a  man  of 
affairs  interested  chiefly  in  travels  and  amusements  and  as  a  dilet- 
tante student  of  the  sciences.  From  the  moment  of  his  release 
he  began  to  regard  himself  as  a  kind  of  Messiah.1  He  was  profoundly 
impressed  by  what  seemed  to  him  to  be  the  birth  of  a  new  society 
at  which  he  had  himself  assisted,  in  which  the  moral  and  political  and 
even  physical  conditions  of  life  were  suddenly  torn  up  by  the  roots, 
when  ancient  beliefs  disappeared  and  nothing  seemed  ready  to  take 
their  place.  He  himself  was  to  be  the  evangelist  of  the  new  gospel, 
and  with  this  object  in  view  on  the  4th  Messidor,  An.  VI,  he  called 
together  the  capitalists  who  were  already  associated  with  him  and, 
pointing  out  the  great  necessity  for  restoring  public  confidence, 
proposed  the  establishment  of  a  gigantic  bank  whose  funds  might 

1  Cf.  especially  Dumas,  Psychologie  de  deux  Messies  positivistes,  Saint-Simon 
tt  A.  ComU  (Paris,  1905),  and  for  biographical  details  Weill,  Saint-Simon  et  son 
Ci'uvre[lS94). 


SAINT- SIMON  AND  INDUSTRIALISM  203 

be  employed  in  setting  up  works  of  public  utility — a  proof  of  the 
curious  way  in  which  economic  and  philosophic  considerations  were 
already  linked  together  in  his  thoughts.1  An  ill-considered  marriage 
which  was  hastily  broken  off,  however,  was  followed  by  a  period  of 
much  extravagance  and  great  misery.  By  the  year  1805  so  reduced 
were  his  circumstances  that  he  was  glad  to  avail  himself  of  the 
generosity  of  one  of  his  old  servants.  After  her  death  he  lived  partly 
upon  the  modest  pension  provided  him  by  his  family  and  partly  upon 
the  contributions  of  a  few  tradesmen,  but  he  was  again  so  miserable 
that  in  1823  he  attempted  suicide.  A  banker  of  the  name  of  Olinde 
Rodrigues  came  to  the  rescue  this  time  and  supplied  him  with  the 
necessary  means  of  support.  He  died  in  1825,  surrounded  by  a 
number  of  his  disciples  who  had  watched  over  the  last  moments  of 
his  earthly  life.  During  all  these  years,  haunted  as  he  was  by  the 
need  for  giving  to  the  new  century  the  doctrine  it  so  much  required, 
he  was  constantly  engaged  in  publishing  brochures,  new  works,  or 
selections  from  his  earlier  publications,  sometimes  alone  and  some- 
times in  collaboration  with  others,2  in  which  the  same  suggestions 
are  always  revived  and  the  same  ideas  keep  recurring,  but  in  slightly 
different  forms. 

Saint-Simon's  earlier  work  was  an  attempt  to  establish  a  scientific 
synthesis  which  might  furnish  mankind  with  a  system  of  positive 
morality  to  take  the  place  of  religious  dogmas.  It  was  to  be  a  kind 
of  "  scientific  breviary  "  where  all  phenomena  could  be  deduced 
from  one  single  idea,  that  of  "  universal  gravitation."  He  him- 
self has  treated  us  to  a  full  account  of  this  system,  which  is  as 
deceptive  as  it  is  simple,  and  which  shows  us  his  serious  limitations 
as  a  philosopher  whose  ambition  far  outran  his  knowledge.  Auguste 
Comte,  one  of  his  disciples,  attempted  a  similar  task  in  his  Cours 
de  Philosophic  positive  and  in  the  Politique  positive,  so  that  Saint- 
Simon,  who  is  usually  considered  the  father  of  socialism,  finds  himself 
also  the  father  of  positivism. 

1  Weill,  Saint-Simon  et  son  (Euvre,  p.  15. 

1  In  1814  De  la  Reorganisation  de  la  Sociite  europeenne,  by  Saint-Simon 
and  A.  Thierry,  his  pupil;  1817-18,  Industrie,  in  4  vols.  (the  3rd  vol.  and  the 
first  book  of  the  4th  vol.  are  the  work  of  A.  Comte) ;  1819,  La  Politique  ;  1821, 
Le  Systeme  industriel ;  1823-24,  Le  Catechisme  des  Industriels  (the  third  book, 
by  A.  Comte,  bears  the  title  Systeme  de  Politique  positive) ;  1 825,  Le  Nouveau 
Christianisme.  Our  quotations  from  Saint-Simon  are  taken  from  the  OEuvrea 
de  Saint-Simon  et  d'Enfantin,  published  by  members  of  the  committee  insti- 
tuted by  Enfantin  for  carrying  out  the  master's  last  wishes  (Paris,  Dentu,  1865), 
and  from  the  (Euvres  choisies  de  Saint-Simon,  published  in  3  vols.  by  Lemonnier 
of  Brussels  (1859). 


204       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

From  1814  up  to  his  death  in  1825  he  partly  relinquished  his 
interest  in  philosophy  and  devoted  himself  almost  exclusively  to  the 
exposition  of  his  social  and  political  ideas,  which  are  the  only  ones 
that  interest  us  here. 

His  economics  might  be  summed  up  as  an  apotheosis  of  industry, 
using  the  latter  word  in  the  widest  sense,  much  as  Smith  had  employed 
the  term  as  synonymous  with  labour  of  all  kind. 

His  leading  ideas,  contained  within  the  compass  of  a  few  striking 
pages,  have  since  become  known  as  "Saint-Simon's  Parable." 

"  Let  us  suppose,"  says  he,  "  that  France  suddenly  loses  fifty 
of  her  first-class  doctors,  fifty  first-class  chemists,  fifty  first-class 
physiologists,  fifty  first-class  bankers,  two  hundred  of  her  best 
merchants,  six  hundred  of  her  foremost  agriculturists,  five  hundred 
of  her  most  capable  ironmasters,  etc.  [enumerating  the  principal 
industries].  Seeing  that  these  men  are  its  most  indispensable 
producers,  makers  of  its  most  important  products,  the  minute  that 
it  loses  these  the  nation  will  degenerate  into  a  mere  soulless  body 
and  fall  into  a  state  of  despicable  weakness  in  the  eyes  of  rival 
nations,  and  will  remain  in  this  subordinate  position  so  long  as 
the  loss  remains  and  their  places  are  vacant.  Let  us  take  another 
supposition.  Imagine  that  France  retains  all  her  men  of  genius, 
whether  in  the  arts  and  sciences  or  in  the  crafts  and  industries, 
but  has  the  misfortune  to  lose  on  the  same  day  the  king's  brother, 
the  Duke  of  Angouleme,  and  all  the  other  members  of  the  royal 
family  ;  all  the  great  officers  of  the  Crown  ;  all  ministers  of  State, 
whether  at  the  head  of  a  department  or  not ;  all  the  Privy  Coun- 
cillors ;  all  the  masters  of  requests  ;  all  the  marshals,  cardinals, 
archbishops,  bishops,  grand  vicars  and  canons ;  all  prefects  and 
sub-prefects  ;  all  Government  employees  ;  all  the  judges  ;  and  on 
top  of  that  a  hundred  thousand  proprietors — the  cream  of  her  nobility. 
Such  an  overwhelming  catastrophe  would  certainly  aggrieve  the 
French,  for  they  are  a  kindly-disposed  nation.  But  the  loss  of  a 
hundred  and  thirty  thousand  of  the  best-reputed  individuals  in  the 
State  would  give  rise  to  sorrow  of  a  purely  sentimental  kind.  It 
would  not  cause  the  community  the  least  inconvenience."  J 

In  other  words,  the  official  Government  is  a  mere  facade.  Its 
action  is  wholly  superficial.  Society  might  exist  without  it  and 
life  would  be  none  the  less  happy.  But  the  disappearance  of  the 

1  L'Organisateur,  Part  I,  1819,  pp.  10-20.  This  passage  was  republished  by 
Olinde  Rodiigues  in  1832  under  the  title  of  UneParabolepolitiquein  a  volume  of 
miscellaneous  writings  by  Saint-Simon,  with  the  result  that  Saint-Simon  was 
prosecuted  before  the  Cour  d'Assises.  He  was  acquitted,  however. 


SAINT-SIMON  AND  INDUSTRIALISM  205 

savants,  industrial  leaders,  bankers,  and  merchants  would  leave  the 
community  crippled.  The  very  sources  of  wealth  would  dry  up, 
for  their  activities  are  really  fruitful  and  necessary.  They  are  the 
true  governors  who  wield  real  power.  Such  was  the  parable. 

According  to  Saint-Simon,  little  observation  is  needed  to  realise 
that  the  world  we  live  in  is  based  upon  industry,  and  that  anything 
besides  industry  is  scarcely  worth  the  attention  of  thinking  people. 
A  long  process  of  historical  evolution,  which  according  to  Saint- 
Simon  commenced  in  the  twelfth  century  with  the  enfranchisement 
of  the  communes  and  culminated  in  the  French  Revolution,  had 
prepared  the  way  for  it.1  At  least  industry  is  the  one  cardinal 
feature  of  the  present  day. 

The  political  concerns  of  his  contemporaries  were  regarded  with 
some  measure  of  despair.  The  majority  of  them  were  engaged  either 
in  defending  or  attacking  the  Charter  of  1814.  The  Liberals  were 
simply  deceiving  themselves,  examining  old  and  meaningless  for- 
mulae such  as  "  the  sovereignty  of  the  people,"  "  liberty,"  and 
"  equality  " — conceptions  that  never  had  any  meaning,2  but  were 
simply  metaphysical  creations  of  the  jurists,3  and  they  ought  to 
have  realised  that  this  kind  of  work  was  perfectly  useless  now  that 
the  feudal  regime  was  overthrown.  Men  in  future  will  have  something 
better  to  do  than  to  defend  the  Charter  against  the  "  ultras."  The 
parliamentary  regime  may  be  very  necessary,  but  it  is  just  a  passing 
phase  between  the  feudalism  of  yesterday  and  the  new  order  of 
to-morrow.4  That  future  order  is  Industrialism — a  social  organisa- 

1  "  With  the  enfranchisement  of  the  communes  we  shall  witness  the  middle 
classes  at  last  in  enjoyment  of  their  liberty,  setting  up  as  a  political  power.  The 
essence  of  that  power  will  consist  in  freedom  from  being  imposed  upon  by 
others  without  consent.  Gradually  it  will  become  richer  and  stronger,  at  the 
same  time  growing  in  political  importance  and  improving  its  social  position  in 
every  respect,  with  the  result  that  the  other  classes,  which  may  be  called  the 
theological  or  feudal  classes,  will  dwindle  in  estimation  as  well  as  in  their 
real  importance.  Whence  I  conclude  that  the  industrial  classes  must  continue 
to  gain  ground,  and  finally  to  include  the  whole  of  society.  Such  seems  to  be 
the  trend  of  things — the  direction  in  which  we  are  moving."  (Lettres  d  un 
Ambricain,  (Euvres,  vol.  ii,  p.  166.) 

*  "  Industry  is  the  basis  of  liberty.     Industry  can  only  expand  and  grow 
strong  with  the  growth  of  liberty.     Were  this  doctrine,  so  old  in  fact  but  so  new 
to  many  people,  once  fully  grasped  instead  of  those  fictitious  dreams  of  antiquity, 
we  should  have  heard  the  last  of  such  sanguinary  phrases  as  '  equality  or  death.'  " 
((Euvres,  vol.  ii,  pp.  210-211.) 

*  "  Lawyers  and  metaphysicians  are  wont  to  take  appearance  for  reality, 
the  name  for  the  thing."    (Syst.  indust.,  (Euvres,  vol.  v.  p.  12.) 

*  "Parliamentary  government  must  be  regarded  as  an  indispensable  step 
in  the  direction  of  industrialism."    ((Euvres,  vol.  iii,  p.  22.)     "  It  is  absolutely 


206        SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

tion  having  only  one  end  in  view,  the  further  development  of  industry, 
the  source  of  all  wealth  and  prosperity. 

The  new  regime  implies  first  of  all  the  abolition  of  all  class  dis- 
tinction. There  will  be  no  need  for  either  nobles,  bourgeois,  or 
clergy.  There  will  be  only  two  categories,  workers  and  idlers — or 
the  bees  and  the  drones,  as  Saint-Simon  puts  it.  Sometimes  he 
refers  to  them  as  the  national  and  anti-national  party.  In  the  new 
society  the  second  class  x  is  bound  to  disappear,  for  there  is  only 
room  for  the  first.  This  class  includes,  besides  manual  workers,2 
agriculturists,  artisans,  manufacturers,  bankers,  savants,  and  artists.8 
Between  these  persons  there  ought  to  be  no  difference  except  that 
which  results  from  their  different  capacities,  or  what  Saint-Simon 
calls  their  varying  stakes  in  the  national  interest.  "  Industrial 
equality,"  he  writes,  "  consists  in  each  drawing  from  society  benefits 
exactly  proportionate  to  his  share  in  the  State — that  is,  in  proportion 
to  his  potential  capacity  and  the  use  which  he  makes  of  the  means 
at  his  disposal — including,  of  course,  his  capital."  4  Saint-Simon 

necessary  if  the  transition  from  the  essentially  arbitrary  regime  which  haa  existed 
hitherto  is  to  be  replaced  by  the  ideal  liberal  regime  which  is  bound  to  come 
into  being  by  and  by."  (Ibid.  p.  21.) 

1  Writing  in  1803  in  his  Lettres  tfun  Habitant  de  Geneve,  he  uses  the  follow- 
ing words :  "  Everyone  will  be  obliged  to  do  some  work.  The  duty  of 
employing  one's  personal  ability  in  furthering  the  interests  of  humanity  is  an 
obligation  that  rests  upon  the  shoulders  of  everyone."  (CEuvres,  vol.  i, 
p.  65.) 

•  "  I  find  it  essential  to  give  to  the  term  '  labour  '  the  widest  latitude  possible. 
The  civil  servant,  the  scientist,  the  artist,  the  manufacturer,  and  the  agriculturist 
are  all  working  as  certainly  as  the  labourer  who  tills  the  ground  or  the  porter 
who  shoulders   his   burden."     (Introduction  to  Travaux  acientifiques,  CEuvres 
choisies,  vol.  i,  p.  221.) 

•  The  national  or  industrial  party  includes  the  following  classes : 

1.  All  who  till  the  land,  as  well  as  any  who  direct  their  operations. 

2.  All  artisans,  manufacturers,  and  merchants,  all  carriers  by  land  or  by  sea, 
as  well  as  everyone  whose  labour  serves  directly  or  indirectly  for  the  production 
or  the  utilisation  of  commodities  ;  all  savants  who  have  consecrated  their  talents 
to  the  study  of  the  positive  sciences,  all  artists  and  liberal  advocates ;  "  the  small 
number  of  priests  who  preach  a  healthy  morality ;  and,  finally,  all  citizens  who 
willingly  employ  either  their  talents  or  their  means  in  freeing  producers  from 
the  unjust  supremacy  exercised  over  them  by  idle  consumers." 

"  In  the  anti-national  party  figure  the  nobles  who  labour  for  the  restoration 
of  the  old  regime,  all  priesta  who  make  morality  consist  of  blind  obedience 
to  the  decrees  of  Pope  or  clergy,  owners  of  real  estates,  noblemen  who  do  nothing, 
judges  who  exercise  arbitrary  jurisdiction,  as  well  as  soldiers  who  support  them — 
in  a  word,  everyone  who  is  opposed  to  the  establishment  of  the  system  that  is 
most  favourable  to  economy  or  liberty."  (Le  Parti  national,  in  Le  Politiquet 
(Euvres,  vol.  iii,  pp.  202-204.) 

•  Syst.  indust.,  (Euvres,  vol.  vi,  p.  17,  note. 


SAINT-SIMON  AND  INDUSTRIALISM  207 

evidently  has  no  desire  to  rob  the  capitalists  of  their  revenues ;  his 
hostility  is  reserved  for  the  landed  proprietors. 

Not  only  must  every  social  distinction  other  than  that  founded 
upon  labour  and  ability  disappear,  but  government  in  the  ordinary 
sense  of  the  term  will  largely  become  unnecessary.  "  National 
association "  for  Saint-Simon  merely  meant  "  industrial  enter- 
prise." "  France  was  to  be  turned  into  a  factory  and  the  nation 
organised  on  the  model  of  a  vast  workshop " ;  but  "  the  task  of 
preventing  thefts  and  of  checking  other  disorders  in  a  factory  is 
a  matter  of  quite  secondary  importance  and  can  be  discharged  by 
subordinates."  l  In  a  similar  fashion,  the  function  of  government 
in  industrial  society  must  be  limited  to  "  defending  workers  from  the 
unproductive  sluggard  and  maintaining  security  and  freedom  for 
the  producer."  2 

So  far  Saint-Simon's  **  industrialism  "  is  scarcely  distinguishable 
from  the  "  Liberalism  "  of  Smith  and  his  followers,  especially  J.  B. 
Say's.  Charles  Comte  and  Dunoyer,  writing  in  their  review,  Le 
Censeur,  were  advancing  exactly  similar  doctrines,8  sometimes  even 
using  identical  terms.  "  Plenty  of  scope  for  talent "  and  laissez- 
faire  were  some  of  the  favourite  maxims  of  the  Liberal  bourgeois. 
Such  also  were  the  aspirations  of  Saint-Simon. 

But  it  is  just  here  that  the  tone  changes.4 

Assuming  that  France  has  become  a  huge  factory,  the  most 
important  task  that  awaits  the  nation  is  to  inaugurate  the  new 
manufacturing  regime  and  to  seek  to  combine  the  interests  of  the 

1  Syst.  indust.,  (Euvres,  vol.  vi,  pp.  91-92. 

*  (Euvres,  vol.  iii,  pp.  35-36. 

*  On  this  point  see  Halevy's  article  in  the  Revue  du  Mots  for  December  1907, 
Les  Idies  iconomiques  de  Saint-Simon,  and  Allix,  article  mentioned  supra,  p.  117. 

*  In  the  following  passage  the  opposition  is  very  marked :    "  One  must 
recognise  that  nearly  all  Government  measures  which  have  presumed  to  influence 
social  prosperity  have  simply  proved  harmful.     Hence  people  have  come  to  the 
conclusion  that  the  best  way  in  which  a  Government  can  further  the  well-being 
of  society  is  by  letting  it  alone.     But  this  method  of  looking  at  the  question, 
however  just  it  may  seem  when  we  consider  it  in  relation  to  the  present  political 
system,  is  evidently  false  when  it  is  adopted  as  a  general  principle.    The  impres- 
sion will  remain,  however,  until  we  succeed  in  establishing  another  political 
order."     (L'Organisateur,  (Euvres,  vol.  iv,  p.  201.) 

Later  on  the  Saint-Simonians  abandoned  this  idea  and  demanded  Govern- 
mental control  of  all  social  relations.  "  Far  from  admitting  that  the  directive 
control  of  Government  in  social  matters  ought  to  be  restricted,  we  believe  that 
it  ought  to  be  extended  until  it  includes  every  kind  of  social  activity.  Moreover, 
we  believe  that  it  should  always  be  exercised,  for  society  to  us  seems  a  veritable 
hierarchy."  (Doctrine  de  Saint-Simon,  Exposition,  Deuxieme  Annee,  p.  108 1 
Paris,  18SO.) 


208       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

entrepreneurs  with  those  of  the  workers  on  the  one  hand  and  of  the 
consumers  on  the  other.  There  is  thus  just  enough  room  for  govern- 
ment— of  a  kind.  What  is  required  is  the  organising  of  forces  rather 
than  the  governing  of  men.1  Politics  need  not  disappear  altogether, 
but  "  must  be  transformed  into  a  positive  science  of  productive 
organisation." 2  "  Under  the  old  system  the  tendency  was  to 
increase  the  power  of  government  by  establishing  the  ascendancy 
of  the  higher  classes  over  the  lower.  Under  the  new  system  the 
aim  must  be  to  combine  all  the  forces  of  society  in  such  a  fashion 
as  to  secure  the  successful  execution  of  all  those  works  which  tend 
to  improve  the  lot  of  its  members  either  morally  or  physically."  * 

Such  will  be  the  task  of  the  new  government,  where  capacity 
will  replace  power  and  direction  will  take  the  place  of  command.4 
Applying  itself  to  the  execution  of  those  tasks  upon  which  there  is 
complete  unanimity,  most  of  them  requiring  some  degree  of  delibe- 
ration and  yet  promptness  of  action,  it  will  gradually  transform 
the  character  of  politics  by  concentrating  attention  upon  matters 
affecting  life  or  well-being — the  only  things  it  need  ever  concern 
itself  with.6 

In  order  to  make  his  meaning  clearer,  Saint-Simon  proposes  to 
confine  the  executive  power  to  a  Chamber  of  Deputies  recruited  from 
the  representatives  of  commerce,  industry,  manufacture,  and  agricul- 
ture. These  would  be  charged  with  the  final  acceptance  or  refusal 
of  the  legislative  proposals  submitted  to  them  by  the  other  two 
Chambers,  composed  exclusively  of  savants,  artists,  and  engineers. 
The  sole  concern  of  all  legislation  would,  of  course,  be  the  develop- 
ment of  the  country's  material  wealth.6 

1  "  Under  the  old  regime  men  were  considered  inferior  to  things,"  accord- 
ing to  a  brochure  entitled  Des  Bourbons  et  des  Stuarts  (1822  ;  (Euvres  choisiea, 
vol.  ii,  p.  447).  "  The  object  of  the  new  system  will  be  to  extend  man's  hold 
over  things."  ((Euvres,  vol.  iv,  p.  81.)  "  In  the  present  state  of  education  what 
the  nation  wants  is  not  more  government,  but  more  cheap  administration." 
(Syst.  indust.,  (Euvres,  vol.  v,  p.  181.)  Engels,  in  his  book  written  in  reply 
to  Eugen  Diihring,  makes  use  of  identical  terms  in  speaking  of  the  socialist 
regime.  "  When  the  administration  of  things  and  the  direction  of  the  processes 
of  production  take  the  place  of  the  governing  of  persons  the  State  will  not  merely 
be  abolished :  it  will  be  dead."  (Philosophic,  Economic  politique,  Socialisme, 
French  translation  by  Laskine,  p.  361 ;  Paris,  1911.) 

*  Lettres  d  un  Americain,  (Euvres,  vol.  ii,  p.  189. 

8  Des  Bourbons  et  des  Stuarts,  (Euvres  cJioisies,  vol.  ii,  pp.  437-438 

*  UOrganisateur,  (Euvres  choisies,  vol.  iv,  pp.  86  and  150-151. 
8  Lettres  d  un  Americain,  (Euvres,  vol.  ii,  p.  188. 

6  This  is  not  the  only  plan  of  government  proposed  by  Saint-Simon,  although 
it  is  the  one  most  characteristic  of  him.  It  is  to  be  found  in  L'Organisa- 
teur  immediately  after  the  Parable.  We  have  to  remember  that  Saint -Simon 


SAINT-SIMON  AND  INDUSTRIALISM  209 

An  economic  rather  than  a  political  form  of  government,  adminis- 
tering things  instead  of  governing  men,  with  a  society  modelled  on 
the  workshop  and  a  nation  transformed  into  a  productive  association 
having  as  its  one  object  "  the  increase  of  positive  utility  by  means  of 
peaceful  industry  "  1 — such  are  the  ruling  conceptions  which  dis- 
tinguish Saint-Simon  from  the  Liberals  and  serve  to  bring  him  into 
the  ranks  of  the  socialists.  His  central  idea  will  be  enthusiastically 
welcomed  by  the  Marxian  collectivists,  and  Engels  speaks  of  it  as 
the  most  important  doctrine  which  its  author  ever  propounded.2 
Proudhon  accepts  it,  and  as  a  practical  ideal  proposes  the  absorption 
of  government  and  its  total  extinction  in  economic  organisation. 
The  same  idea  occurs  hrMenger's  Neue  Staatslehre,3  and  in  Sorel's 
writings,  where  he  speaks  of  "  reorganising  society  on  the  model  of  a 
factory."  4 

It  is  this  novel  conception  of  government  that  most  clearly 
distinguishes  Saint-Simon's  industrialism  from  economic  Liberalism.6 

But,  despite  the  fact  that  he  gave  to  socialism  one  of  its  most 
fruitful  conceptions,  we  hardly  know  whether  to  class  Saint-Simon 
as  a  socialist  or  not,  especially  if  we  consider  that  the  essence  of 
socialism  consists  in  the  abolition  of  private  property.  It  is  true 

was  very  hostile  to  a  Government  of  savants.  Power  was  to  be  placed  in  the 
hands  of  the  industrial  leaders — the  savants  were  simply  to  advise.  "  Should 
we  ever  have  the  misfortune  to  establish  a  political  order  in  which  adminis- 
tration was  entrusted  to  savants  we  should  soon  witness  the  corruption  of  the 
scientists,  who  would  readily  adopt  the  vices  of  the  clergy  and  become  astute, 
despotic  quibblers."  (Syst.  indust.,  CEuvres,  vol.  v,  p.  161.) 

1  Syst.  indust.,  CEuvres,  vol.  vi,  p.  96. 

1  F.  Engels,  Herrn  Eugen  Dilhrings  Umwdlzung  der  Wissenschaft,  4th  ed., 
p.  277.  French  translation,  Paris,  1911,  p.  334.  The  whole  of  this  chapter  in 
Engels'  book  is  from  the  pen  of  Karl  Marx. 

*  French  translation  under  the  title  L'Stat  socialiste,  Paris,  1906. 

4  This  is  the  full  text :  "  The  object  of  socialism  is  to  set  up  a  new  system  of 
society  based  upon  the  workshop  as  a  model.  The  rights  of  the  society  will  be 
the  customary  rights  of  the  factory.  Not  only  will  socialism  stand  to  benefit 
by  the  existence  of  the  industrial  system  which  has  been  built  up  by  capital 
and  science  upon  the  basis  of  technical  development,  but  it  will  gain  even  more 
from  that  spirit  of  co-operation  which  has  long  been  a  feature  of  factory  life, 
drawing  out  the  best  energy  and  the  best  skill  of  the  workman."  Earlier  in  the 
same  volume  he  writes:  "Everything  will  proceed  in  an  orderly,  economical 
fashion,  just  like  a  factory."  (G.  Sorel,  Le  Syndicalisms  revolutionnaire,  in  Le 
Mouvement  aocialisle,  November  1  and  15,  1905.) 

*  Saint-Simon  often  quotes  Say  and  Smith  with  distinct  approval.     But  he 
charges  Say  with  the  separation  of  politics  from  economics  instead  of  merging 
the  former  in  the  latter,  and  with  inability  to  realise  to  the  full  extent  what  he 
"  dimly  saw,  as  it  were,  in  spite  of  himself,  namely,  that  political  economy 
is  the  one  true  foundation  of  politics."    (Lettres  d  un  Amiricain,  (Euvrts,  vol.  ii, 
p.  185.) 


210       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

that  in  one  celebrated  passage  he  speaks  of  the  transformation  of 
private  property.1     But  it  is  quite  an  isolated  exception.     Capital 

1  Saint-Simon  is  classed  among  the  socialists  for  two  reasons  :  (1)  the  interest 
he  takes  in  the  condition  of  the  poor  ;  (2)  his  opinions  concerning  the  necessity 
for  reforming  the  institution  of  private  property.  But  none  of  the  texts  that 
are  generally  quoted  seem  to  have  the  significance  that  is  occasionally  given 
them.  With  regard  to  the  first  point,  a  celebrated  passage  from  the  Nouveau 
Christianisme  is  the  one  usually  quoted  :  "  Society  should  be  organised  in  such 
a  fashion  as  to  secure  the  greatest  advantage  for  the  greatest  number.  The 
object  of  all  its  labours  and  activities  should  be  the  promptest,  completest  amelio- 
ration possible  of  the  moral  and  physical  condition  of  the  most  numerous  class." 
( CEuvres,  vol.  vii,  pp.  108-109. )  Already  in  his  Systeme  industriel  Saint-Simon  had 
said  that  the  direct  object  which  he  had  in  view  was  to  better  the  lot  of  that 
class  that  had  no  other  means  of  existence  than  the  labour  of  its  own  right  arm. 
(Ibid.,  vol.  vi,  p.  81.)  But  is  this  not  just  the  old  Benthamite  formula — the 
greatest  good  of  the  greatest  number  T  Besides,  how  does  Saint-Simon  propose 
to  secure  all  this  ?  By  giving  the  workers  more  power  ?  Not  at  all.  "  The 
problem  of  social  organisation  must  be  solved  for  the  people.  The  people  them- 
selves are  passive  and  listless  and  must  be  discounted  in  any  consideration  of  the 
question.  The  best  way  is  to  entrust  public  administration  to  the  care  of  the 
industrial  chiefs,  who  will  always  directly  attempt  to  give  the  widest  possible 
scope  to  their  undertakings,  with  the  result  that  their  efforts  in  this  direction 
will  lead  to  the  maximum  expansion  of  the  amount  of  work  executed  by  the 
mass  of  the  people."  (Ibid.,  vol.  vi,  pp.  82-83.)  A  Liberal  economist  would 
hardly  have  expressed  it  otherwise. 

As  to  the  question  of  private  property,  Saint-Simon  certainly  regarded  its 
transformation  as  at  least  possible.  This  is  seen  in  a  number  of  passages. 
"  Property  should  be  reconstituted  and  established  upon  a  foundation  that 
might  prove  more  favourable  for  production,"  says  he  in  L'Organisateur. 
(Ibid.,  vol.  iv,  p.  59.)  Elsewhere,  in  a  letter  written  to  the  editor  of  the  Journal 
general  de  la  France,  he  mentions  the  fact  that  he  is  occupied  with  the  develop- 
ment of  the  following  ideas  :  (1 )  That  the  law  establishing  the  right  of  private 
property  is  the  most  important  of  all,  seeing  that  it  is  the  basis  of  our  social 
edifice ;  (2)  the  institution  of  private  property  ought  to  be  constituted  in  such  a 
fashion  that  the  possessors  may  be  stimulated  to  make  the  best  possible  use 
of  it.  (Ibid.,  vol.  iii,  pp.  43-44.)  In  his  Lettres  a  un  Americain  he  gives  the 
following  resume  of  the  principles  which  underlie  the  work  of  J.  B.  Say  (an 
incidental  proof  of  his  attachment  to  the  Liberal  economists) :  "  The  production 
of  useful  objects  is  the  only  positive,  reasonable  aim  which  political  societies  can 
propose  for  themselves,  and  consequently  the  principle  of  respect  for  production 
and  producers  is  a  much  more  fruitful  one  than  the  other  principle  of  respect  for 
property  and  proprietors."  (CEuvres,  vol.  ii,  pp.  186-187.)  But  all  that  this 
seems  to  us  to  imply  is  that  the  utility  of  property  constitutes  its  legality  and  that 
it  should  be  organised  with  a  view  to  social  utility.  Admitting  that  he  did  con- 
ceive of  the  necessity  of  a  reform  of  property,  it  does  not  appear  that  he  intended 
this  to  mean  anything  beyond  a  reform  of  landed  property.  We  have  already 
seen  how  he  regarded  capital  as  a  kind  of  social  outlay  which  demanded  remunera- 
tion. The  following  passage  bears  eloquent  testimony  to  his  respect  for  movable 
property :  "  Wealth,  generally  speaking,  affords  a  proof  of  the  manufacturers' 
ability  even  where  that  wealth  is  derived  from  inherited  fortune,  whereas  in 
the  other  classes  of  society  it  is  apparently  true  to  say  that  the  richer  are  inferior 


CRITICISM  OF  PRIVATE  PROPERTY  211 

as  well  as  labour,  he  thought,  were  entitled  to  remuneration.  The 
one  as  well  as  the  other  involved  some  social  outlay.  He  would 
probably  have  been  quite  content  with  a  purely  governmental 
reform. 

It  would  not  be  difficult,  however,  to  take  the  ideal  of  indus- 
trialism as  outlined  by  Saint-Simon  as  the  basis  of  a  demand  for  a 
much  more  radical  reform  and  a  much  more  violent  attack  upon 
society.  Such  was  the  task  which  the  Saint-Simonians  took  upon 
themselves,  and  our  task  now  is  to  show  how  collectivism  was 
gradually  evolved  out  of  industrialism. 


II :  THE  SAINT-SIMONIANS  AND  THEIR  CRITICISM  OF 
PRIVATE  PROPERTY 

SAINT-SIMON'S  works  were  scarcely  ever  read.  His  influence  was 
essentially  personal,  and  the  task  of  spreading  a  knowledge  of  his 
ideas  devolved  upon  a  number  of  talented  disciples  whom  he  had 
succeeded  in  gathering  round  him.  Augustin  Thierry,  who  was  his 
secretary  from  1814  to  1817,  became  his  adopted  son.  Auguste 
Comte,  who  occupied  a  similar  post,  was  a  collaborator  in  all  his 
publications  between  1817  and  1824.  Olinde  Rodrigues  and  his 
brother  Eugene  were  both  among  his  earliest  disciples.  Enfantin, 
an  old  student  of  the  Polytechnic,  and  Bazard,  an  old  Carbonaro 
who  had  grown  weary  of  political  experiments,  were  also  of  the 
number.  Soon  after  the  death  of  Saint-Simon  his  following  founded 
a  journal  called  Le  Producteur  with  a  view  to  popularising  his  ideas. 
Most  of  the  articles  on  economics  were  contributed  by  Enfantin. 
The  paper  lasted  only  for  one  year,  although  the  number  of  converts 
to  the  new  doctrine  was  rapidly  increasing.  All  of  them  were 
persuaded  that  Saint-Simon's  ideas  furnished  the  basis  of  a  really 
modern  faith  which  would  at  once  supplant  both  decadent  Catho- 
licism and  political  Liberalism,  the  latter  of  which,  in  their  opinion, 
was  a  purely  negative  doctrine. 

In  order  to  strengthen  the  intellectual  ties  which  already  united 
them,  this  band  of  enthusiasts  set  up  among  themselves  a  sort  of 
hierarchy  having  at  its  summit  a  kind  of  college  or  institution 
composed  of  the  more  representative  members  of  the  group,  upon 
whom  the  title  "  fathers  "  was  bestowed.  The  next  lower  grade 
was  composed  of  "  sons,"  who  were  to  regard  one  another  as 

in  capacity  to  those  who  have  received  less  education  but  have  a  smaller  fortune. 
This  ia  a  truth  that  must  play  an  important  part  in  positive  politics."  (Syst. 
indust.,  Ofiuvrea,  vol.  v,  p.  49,  note.) 


212       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

"  brothers."  It  was  in  1828,  under  the  influence  of  Eugene  Rodrigues, 
that  the  Saint-Simonians  assumed  this  character  of  an  organised  sect. 
About  the  same  time  Bazard,  one  of  their  number,  was  giving  an 
exposition  of  the  creed  in  a  series  of  popular  lectures.  These  lectures, 
delivered  during  the  years  1828-30,  and  listened  to  by  many  men 
who  were  afterwards  to  play  an  important  part  in  the  history  of 
France,  such  as  Ferdinand  de  Lesseps,  A.  Carrel,  H.  Carnot,  the 
brothers  Pereire,  and  Michel  Chevalier,  were  published  in  two 
volumes  under  the  title  Exposition  de  la  Doctrine  de  Saint-Simon. 
The  second  volume  is  more  particularly  concerned  with  philosophy 
and  ethics.  The  first  includes  the  social  doctrine  of  the  school,  and 
according  to  Menger  forms  one  of  the  most  important  expositions 
of  modern  socialism.1 

Unfortunately,  under  the  influence  of  Enfantin  the  philosophical 
and  mystical  element  gained  the  upper  hand  and  led  to  the  downfall 
of  the  school. 

The  Saint-Simonians  considered  that  it  was  not  enough  to  take 
modern  humanity  into  its  confidence  and  reveal  to  it  its  social 
destiny.  It  must  be  taught  to  love  and  desire  that  destiny  with 
all  the  ardour  of  romantic  youth.  For  the  accomplishment  of  this 
end  there  must  exist  a  unity  of  action  and  thought  such  as  a  common 
religious  conviction  alone  can  confer.  And  so  Saint-Simonism 
became  a  religion,  a  cult  with  a  moral  code  of  its  own,  with  meetings 
organised  and  churches  founded  in  different  parts  of  the  country, 
and  with  apostles  ready  to  carry  the  good  tidings  to  distant  lands. 
A  striking  phenomenon  surely,  and  worthy  the  fullest  study.  It 
was  a  genuine  burst  of  religious  enthusiasm  among  men  opposed  to 
established  religion  but  possessed  of  fine-  scientific  culture — the 
majority  of  whom,  however,  as  it  turned  out,  were  better  equipped 
for  business  than  for  the  propagation  of  a  new  gospel. 

Enfantin  and  Bazard  were  to  be  the  popes  of  this  new  Catholicism. 
But  Bazard  soon  retired  and  Enfantin  became  "  supreme  Father." 
He  withdrew,  with  forty  of  the  disciples,  into  a  house  at  Menil- 
montant,  where  they  lived  a  kind  of  conventual  life  from  April  to 
December  1831.  Meanwhile  the  other  propagandists  were  as  active 
as  ever,  the  work  being  now  carried  on  in  the  columns  of  Le  Globe, 

1  The  exact  title  is  Doctrine  de  Saint-Simon,  Exposition,  Premiere  Annie, 
1829.  Our  quotations  are  taken  from  the  second  edition  (Paris,  1830).  One 
ought  to  mention,  in  addition  to  these,  the  articles  contributed  by  Enfantin  to 
Le  Globe,  and  republished  under  th»  title  of  Sconomie  politique  et  Politique,  in 
one  volume  (2nd  ed.,  1832).  But  none  of  these  articles  is  as  interesting  as  the 
Doctrine,  and  they  only  reproduce  the  ideas  already  discussed  by  Enfantin  in 
his  articles  in  Le  Producttur. 


CRITICISM  OF  PRIVATE  PROPERTY  213 

which  became  the  property  of  the  school  in  July  1831.  This  strange 
experiment  was  cut  short  by  judicial  proceedings,  which  resulted  in 
a  year's  imprisonment  for  Enfantin,  Duverger,  and  Michel  Chevalier, 
all  of  whom  were  found  guilty  of  forming  an  illegal  association.  This 
was  the  signal  for  dispersion. 

The  last  phase  was  the  most  extravagant  in  the  whole  history 
of  the  school,  and  naturally  it  was  the  phase  that  attracted  most 
attention.  The  simple  social  doctrine  of  Saint-Simon  was  over- 
whelmed by  the  new  religion  of  the  Saint-Simonians,  much  as  the 
Positivist  religion  for  a  while  succeeded  in  eclipsing  the  Positive 
philosophy.  Our  concern,  of  course,  is  chiefly  with  the  social 
doctrine  as  expounded  in  the  first  volume  of  the  Exposition. 
That  doctrine  is  sufficiently  new  to  be  regarded  as  an  original 
development  and  not  merely  as  a  risumi  of  Saint-Simon's  ideas. 
Both  Bazard  and  Enfantin  had  some  hand  in  it.  But  it  is  almost 
certain  that  it  was  the  latter  who  supplied  the  economic  ideas,1 
and  that  to  the  formation  of  those  ideas  Sismondi's  work  contributed 
not  a  little.  The  work  is  quite  as  remarkable  for  the  vigorous  logical 
presentation  of  the  doctrine  as  it  is  for  the  originality  of  its 
ideas.  The  oblivion  into  which  it  has  fallen  is  not  easily  explicable, 
especially  if  we  compare  it  with  the  many  mediocre  productions 
that  have  somehow  managed  to  survive.  There  are  not  wanting 
signs  of  a  revived  interest  in  the  doctrines,  and  for  our  own  part 
we  are  inclined  to  give  them  a  very  high  place  among  the  economic 
writings  of  the  century. 

The  Doctrine  de  Saint-Simon  resolves  itself  into  an  elaborate 
criticism  of  private  property. 

The  criticism  is  directed  from  two  points  of  view — that  of  dis- 
tribution and  that  of  the  production  of  wealth,  that  of  justice  and 

1  Despite  the  fact  that  the  oral  exposition  of  the  doctrine  was  the  work 
of  Bazard  and  was  prepared  for  the  press  by  his  disciples— Hippolyte  Carnot 
among  others — most  of  the  economic  ideas  contained  in  it  must  be  attributed  to 
Enfantin.  Enfantin  also  was  responsible  for  the  majority  of  the  economic 
articles  that  appeared  in  Lt,  Producteur.  But  the  doctrine  set  forth  in  L« 
Producteur  differs  considerably  from  that  expounded  in  the  Exposition.  Interest 
and  rent  are  subjected  to  severe  criticism  as  tributes  paid  to  idleness  by  industry. 
Inheritance,  on  the  other  hand,  though  treated  with  scant  sympathy,  is  not 
condemned.  A  lowering  of  the  rate  of  interest  would,  Enfantin  thinks,  help 
to  enfranchise  the  workers,  and  a  sound  credit  system  would  solve  the  greatest 
of  modern  problems— that  is,  it  would  reconcile  workers  and  idlers,  "  whose 
interests  will  never  again  be  confused  with  the  general  interest,  inasmuch  as 
the  possession  of  the  fruits  of  past  labour  will  no  longer  constitute  a  claim  to 
the  enjoyment  of  the  benefits  of  labour  in  the  present  or  future."  (Le  Producteur, 
•  Tol.  ii,  p.  124.)  These  ideas  are  more  fully  developed  in  the  Exposition. 


214          SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

that  of  utility.  The  attack  is  carried  on  from  both  sides  at  once, 
and  most  of  the  arguments  used  during  the  course  of  the  century 
are  here  hurled  indiscriminately  against  the  institution  of  private 
property.  The  doctrines  of  Saint-Simon  contributed  not  a  little  to 
the  success  of  the  campaign. 

(a)  Saint-Simon  had  already  emphasised  the  impossibility  of 
workers  and  idlers  coexisting  in  the  new  society.  Industrialism 
could  hold  out  no  promise  for  the  second  class.  Ability  and  labour 
only  had  any  claim  to  remuneration.  By  some  peculiar  miscon- 
ception, however,  Saint-Simon  had  regarded  capital  as  involving 
some  degree  of  personal  sacrifice  which  entitled  it  to  special  remunera- 
tion. It  was  here  that  the  Saint-Simonians  intervened.  Was  it 
not  perfectly  obvious  that  private  property  in  capital  was  the  worst 
of  all  privileges  ?  The  Revolution  had  swept  away  caste  distinctions 
and  suppressed  the  right  of  primogeniture,  which  tended  to  perpetuate 
inequality  among  members  of  the  same  family,  but  had  failed  to 
touch  individual  property  and  its  privilege  of  "  laying  a  toll  upon 
the  industry  of  others."  This  right  of  levying  a  tax  is  the  funda- 
mental idea  in  all  their  definitions  of  private  property.1  "  Property, 
according  to  the  generally  accepted  meaning  of  the  term  to-day, 
consists  of  wealth  which  is  not  destined  to  be  immediately  consumed, 
but  which  entitles  its  owner  to  a  revenue.  Within  this  category  are 
included  the  two  agents  of  production,  land  and  capital.  These  are 
primarily  instruments  of  production,  whatever  else  they  may  be. 
Property-owners  and  capitalists — two  classes  that  need  not  be 
distinguished  for  our  present  purpose — have  the  control  of  these 
instruments.  Their  function  is  to  distribute  them  among  the 
workers.  The  distribution  takes  place  through  a  series  of  operations 
which  give  rise  to  the  economic  phenomena  of  interest  and  rent.2 
Consequently  the  worker,  because  of  this  concentration  of  property 
in  the  hands  of  a  few  individuals,  is  forced  to  share  the  fruits  of  his 
labour.  Such  an  obligation  is  nothing  short  of  the  exploitation  of 
one  man  by  another,3  an  exploitation  all  the  more  odious  because 
the  privileges  are  carefully  preserved  for  one  section  of  the  com- 
munity. Thanks  to  the  laws  of  inheritance,  exploiter  and  exploited 
never  seem  to  change  places. 

To  the  retort  that  proprietors  and  capitalists  are  not  necessarily 
idle — that  many  of  them,  in  fact,  work  hard  in  order  to  increase  their 
incomes — the  Saint-Simonians  reply  that  all  this  is  beside  the  point. 
A  certain  portion  of  the  income  may  possibly  result  from  personal 

1  Doctrine  de  Saint-Simon,  p.  182. 

•  Ibid.,  p.  190.  •  Ibid.,  p.  93. 


CRITICISM  OF  PRIVATE  PROPERTY  215 

effort,  but  whatever  they  receive  either  as  capitalists  or  proprietors 
can  obviously  only  come  from  the  labour  of  others,  and  that  clearly 
is  exploitation. 

It  is  not  the  first  time  we  have  encountered  this  word  "  exploita- 
tion." We  are  reminded  of  the  fact  that  Sismondi  made  use  of  it,1 
and  the  same  term  will  again  meet  us  in  the  writings  of  Marx  and 
others.  None  of  them,  however,  uses  it  in  quite  the  same  sense,  and 
it  might  be  useful  to  distinguish  here  between  the  various  meanings 
of  a  term  which  plays  such  an  important  role  in  socialist  literature 
and  which  leads  to  so  much  confusion. 

Sismondi,  we  know,  regarded  interest  as  the  legitimate  income  of 
capital,  but  at  the  same  time  admitted  that  the  worker  may  be 
exploited. 

Such  exploitation,  he  thought,  took  place  whenever  the  wages 
were  barely  sufficient  to  keep  the  wage-earner  alive,  although 
at  the  same  time  the  master  might  be  living  in  luxurious  ease. 
In  other  words,  there  is  exploitation  whenever  the  worker  gets  less 
than  a  "  just "  wage.  It  is  merely  a  temporary  defect  and  not 
an  ineradicable  disease  of  the  economic  system.  It  certainly  does 
occur  occasionally,  although  there  is  no  reason  why  it  ever  should, 
and  it  may  be  removed  without  bringing  the  whole  system  to  ruin. 
Conceived  of  in  this  vague  fashion,  what  is  known  as  exploitation 
is  as  difficult  to  define  as  the  '*  just  price  "  itself.  It  appears  under 
several  aspects,  and  is  by  no  means  peculiar  to  the  master-servant 
relation.  An  individual  is  exploited  whenever  advantage  is  taken 
of  his  ignorance  or  timidity,  his  weakness  or  isolation,  to  force 
him  to  part  with  his  goods  or  his  services  at  less  than  the  "  just 
price  "  or  to  pay  more  for  the  goods  or  services  of  others  than  they 
are  really  worth. 

The  Saint-Si  monians,  on  the  other  hand,  considered  that  exploita- 
tion was  an  organic  defect  of  our  social  order.  It  is  inherent  in 
private  property,  of  which  it  is  an  invariable  concomitant.  It  is  not 
simply  an  incidental  abuse,  but  the  most  characteristic  trait  of  the 
whole  system,  for  the  fundamental  attribute  of  all  property  is  just 
this  right  to  enjoy  the  fruits  of  labour  without  having  to  undergo  the 
irksome  task  of  producing.  Such  exploitation  is  not  confined  to 
manual  labourers  ;  it  applies  to  every  one  who  has  to  pay  a  tribute  to 
the  proprietor.  The  entrepreneur,  in  his  turn,  becomes  a  victim 
because  of  the  interest  which  he  pays  to  the  capitalist,  who  supplies 
him  with  the  funds  which  he  needs.2 

1  Sismondi 's  term  was  rather  "  spoliation."     See  supra,  p.  185. 

1  "  The  mass  of  workers  are  to-day  exploited  by  those  people  whose  property 


216       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

The  entrepreneur's  profit,  on  the  other  hand,  is  not  the  result  of 
exploitation.  It  represents  payment  for  the  work  of  direction. 
The  master  may  doubtless  abuse  his  position  and  reduce  the  wages 
of  the  workers  excessively.  The  Saint-Simonians  would  then  agree 
with  Sismondi  in  calling  this  exploitation.  But  this  is  not  a  necessity 
of  the  system.  And  the  Saint-Simontans  look  forward  to  a  future 
state  of  society  in  which  exceptional  capacity  will  always  be  able 
to  enjoy  exceptional  reward.1  This  is  one  of  the  most  interesting 
elements  in  their  theory. 

Marx  conceives  of  exploitation  as  an  organic  vice  inherent  in 
capitalism.  But  with  him  the  term  has  quite  a  different  connotation 
from  that  given  it  by  the  Saint-Simonians.  Following  the  lead  of 
certain  English  socialists,  Marx  comes  to  the  conclusion  that  the 
origin  of  exploitation  must  be  sought  in  the  present  method  of 
exchanging  wealth.  Labour,  in  his  opinion,  is  the  source  of  all  value, 
and  consequently  interest  and  profit  must  be  of  the  nature  of  theft. 
The  entrepreneur's  revenue  is  quite  as  unjust  as  the  capitalist's  or 
landlord's.2 

This  last  theory,  with  its  wholesale  condemnation  of  income  of 
every  kind  save  the  worker's  wage,  seems  much  more  logical  than 
any  of  the  others.  But  as  a  matter  of  fact  it  is  much  more  open  to 
criticism.  If  it  can  be  demonstrated  that  the  value  of  products  is 
not  the  mere  result  of  manual  labour,  then  Marx's  idea  falls  to 
the  ground.  The  Saint-Simonians  were  never  embarrassed  by 
any  theory  of  value.  Their  whole  contention  rests  upon  the  dis- 

they  use.  Captains  of  industry  in  their  dealings  with  proprietors  have  to  submit 
to  a  similar  kind  of  treatment,  only  to  a  much  less  degree.  But  they  occa- 
sionally share  in  the  privilege  of  the  exploiters,  for  the  full  burden  of  exploitation 
falls  upon  the  working  classes — that  is,  upon  the  vast  majority  of  mankind." 
(Doctrine  de  Saint-Simon,  p.  176.) 

1  "  It  is  our  belief  that  profits  diminish  while  wages  increase  ;  but  the  term 
'  wages  '  as  we  use  it  includes  the  profits  that  accrue  to  the  entrepreneur,  whose 
earnings  we  regard  as  the  price  of  his  labour."  (Le  Producteur,  vol.  i,  p.  245. 
The  article  is  by  Enfantin.) 

*  We  might  sum  up  the  different  senses  of  the  word  "  exploitation  "  as  used 
by  Sismondi,  the  Saint-Simonians,  and  Marx  respectively  as  follows : 

(1)  Sismondi  thinks  that  the  worker  is  exploited  whenever  he  is  not  paid  a 
wage  sufficient  to  enable  him  to  lead  a  decent  existence.     Unearned  income  seems 
quite  legitimate,  however. 

(2)  Exploitation  exists,  in  the  opinion  of  the  Saint-Simonians,  whenever  a 
part  of  the  material  produce  raised  by  labour  is  devoted  to  the  remuneration  of 
proprietors  through  the  operation  of  ordinary  social  factors. 

(3)  Marx  speaks  of  exploitation  whenever  a  portion  of  the  produce  of  labour 
is  devoted  to  the  remuneration  of  capital  either  through  the  existence  of  social 
institutions  or  the  operation  of  the  laws  of  exchange. 


CRITICISM  OF  PRIVATE  PROPERTY  217 

tinction  between  the  income  which  is  got  from  labour  and  the 
revenue  which  is  derived  from  capital,  which  every  one  can  appre- 
ciate. It  was  a  distinction  which  had  already  been  emphasised 
by  Sismondi,  and  no  conclusion  other  than  the  illegitimacy  of  all 
revenue  not  derived  from  labour  can  be  drawn  from  the  premises 
thus  stated.  Some  basis  other  than  labour  must  be  discovered  if 
this  revenue  is  ever  to  be  justified,  and  a  new  defence  of  private" 
property  must  somehow  be  attempted. 

The  exigencies  of  production  itself  may  supply  such  justification. 
Private  property  and  the  special  kind  of  revenue  which  is  derived 
from  its  possession  justifies  itself,  in  the  opinion  of  a  growing  number 
of  economists,  on  account  of  the  stimulus  it  affords  to  production 
and  the  accumulation  of  wealth.  This  seems  the  most  advantageous 
method  of  defence,  and  it  is  one  of  the  grounds  chosen  by  the 
Physiocrats.1 

But  the  Saint-Simonians  from  the  very  first  set  this  argument 
aside  and  attacked  the  institution  of  private  property  in  the  interests 
of  social  utility  no  less  than  in  the  interest  of  justice.  Production 
as  well  as  distribution,  in  their  opinion,  demanded  its  extinction. 

(6)  This  brings  us  to  the  second  point,  which  Saint-Simon  did 
little  more  than  suggest,  namely,  whether  the  institution  of  private 
property  as  at  present  existing  is  in  the  best  interests  of  producers. 
The  Saint-Simonians  hold  that  it  clearly  is  not,  so  long  as  the  present 
method  of  distributing  the  instruments  of  production  continues.  At 
the  present  moment  capital  is  transmitted  in  accordance  with  the 
Jaws  of  inheritance.  Individuals  chosen  by  the  accident  of  birth 
are  its  depositors,  and  they  are  charged  with  the  most  difficult  of  all 
tasks,  namely,  the  best  utilisation  of  the  agents  of  production. 
Social  interest  demands  that  they  should  be  placed  in  more  capable 
hands  and  distributed  in  those  places  and  among  those  industries 
in  which  the  need  for  those  particular  instruments  is  most  keenly 
felt,  without  any  fear  of  a  scarcity  in  one  place  or  a  glut  in  another.1 
To-day  it  is  a  blind  chance  that  picks  out  the  men  destined  to  carry 
out  this  infinitely  difficult  task.  And  all  the  efforts  of  the  Saint- 
Simonians  are  concentrated  just  on  this  one  point — inheritance. 

Their  indignation  is  easily  explained.  There  is  certainly  some- 
thing paradoxical  in  the  fact  to  which  they  draw  attention.  If  we 
accept  Smith's  view,  that  government  "  is  in  reality  instituted  for 
the  defence  of  those  who  have  some  property  against  those  who  have 
none  at  all  " — a  very  narrow  conception  of  the  function  of  govern- 
ment 8 — inheritance  is  simply  inevitable.  On  tlie  other  hand, 

1  See  p.  25.  *  Doctrine,  p.  191,  »  See  p.  79,  note. 

K  U.  H 


218       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

if  we  put  ourselves  at  the  point  of  view  of  the  Saint-Simonians, 
who  lived  in  an  industrial  society  where  wealth  was  regarded,  not 
as  an  end,  but  as  a  means,  not  merely  as  the  source  of  individual 
income,  but  as  the  instrument  of  social  production,  it  seems  utterly 
wrong  that  it  should  be  left  at  the  disposal  of  the  first  comer.  The 
practice  of  inheritance  can  only  be  justified  on  the  ground  that  it 
provides  a  stimulus  to  the  further  accumulation  of  wealth,  or  that 
in  default  of  a  truly  rational  system  the  chances  of  birth  are  not 
much  more  open  to  criticism  than  any  other. 

Such  scepticism  was  little  to  the  taste  of  the  Saint-Simonians. 
But  they  were  firmly  convinced  that  all  the  disorders  of  production, 
whether  apparent  or  real,  were  due  to  the  dispersion  of  property 
according  to  the  chances  of  life  and  death. 

"  Each  individual  devotes  all  his  attention  to  his  own  immediate 
dependents.  No  general  view  of  production  is  ever  taken.  There 
is  no  discernment  and  no  exercise  of  foresight.  Capital  is  wanting 
here  and  excessive  there.  This  want  of  a  broad  view  of  the  needs 
of  consumers  and  of  the  resources  of  production  is  the  cause  of  those 
industrial  crises  whose  origin  has  given  rise  to  so  much  fruitless 
speculation  and  so  many  errors  which  are  still  circulating  in  our 
midst.  In  this  important  branch  of  social  activity,  where  so  much 
disturbance  and  such  frequent  disorder  manifests  itself,  we  see  the 
evil  result  of  allowing  the  distribution  of  the  instruments  of  produc- 
tion to  be  in  the  hands  of  isolated  individuals  who  are  at  once 
ignorant  of  the  demands  of  industry,  of  other  men's  needs,  and  of 
the  means  that  would  satisfy  them.  This  and  nothing  else  is  the 
cause  of  the  evil."  l 

Escape  from  such  economic  anarchy,  which  has  been  so  frequently 
described,  can  only  become  possible  through  collectivism — at  least 
so  the  Saint-Simonians  thought.2  The  State  is  to  become  the  sole 
inheritor  of  all  forms  of  wealth.  Once  in  possession  of  the  instru- 
ments of  production,  it  can  distribute  them  in  the  way  it  thinks 
best  for  the  general  interest.  Government  is  conceived  on  the 
model  of  a  great  central  bank  where  all  the  wealth  of  the  country 
will  be  deposited  and  again  distributed  through  its  numerous  branches. 
The  uttermost  ends  of  the  kingdom  will  be  made  fertile,  and  the 
necessaries  of  life  will  be  supplied  to  all  who  dwell  therein.  The 
best  of  the  citizens  will  be  put  to  work  at  tasks  that  will  call  forth 
their  utmost  efforts,  and  their  pay  will  be  as  their  toil.  This  social 

1  Doctrine,  pp.^191-192. 

1  The  Saint-Simonians  never  make  use  of  the  term,  but  they  describe  the 
doctrine  admirably. 


CRITICISM  OF  PRIVATE  PROPERTY  219 

institution  would  be  invested  with  all  the  powers  which  are  so  blindly 
wielded  by  individuals  at  the  present  moment.1 

We  need  not  insist  too  much  on  this  project  or  press  for  further 
details,  which  the  Saint-Simonians  would  have  some  difficulty  in 
supplying. 

Who,  for  example,  is  to  undertake  the  formidable  task  of  judging 
of  the  capacity  of  the  workmen  or  of  paying  for  their  work  ?  They 
are  to  be  the  "  generals  " — the  superiors  who  are  to  be  set  free  from 
the  trammels  of  specialisation  and  whose  instinctive  feelings  will 
naturally  urge  them  to  think  only  of  the  general  interest.  The 
chief  will  be  he  who  shows  the  greatest  concern  about  the  social 
destiny  of  the  community.2  It  is  not  very  reassuring,  especially 
when  we  remember  that  even  with  the  greatest  men  there  is  occa- 
sionally a  regrettable  confusion  of  general  and  private  interests. 

But  admitting  the  incomparable  superiority  of  the  "generals," 
what  of  obeying  them  ?  Will  the  inferiors  take  kindly  to  submission 
or  will  they  have  to  be  forced  to  it  ?  The  first  alternative  was  the 
one  which  they  seemed  to  favour,  for  the  new  religion,  "  Saint- 
Simonism,"  would  always  be  at  hand  to  inspire  devotion  and  to 
deepen  the  respect  of  the  inferiors  for  their  betters.3  One  is  tempted 

1  "  We  may  provisionally  speak  of  this  system  as  a  general  system  of  banking, 
ignoring  for  the  time  being  the  somewhat  narrow  interpretation  usually  placed 
upon  that  word.  In  the  first  place,  the  system  would  comprise  a  central  bank, 
which  would  directly  represent  the  Government.  This  bank  would  be  the 
depository  for  every  kind  of  wealth,  of  all  funds  for  productive  purposes  and 
all  instruments  of  labour — in  a  word,  it  would  include  everything  that  is  to-day 
comprised  within  the  term  'private  property.'  Depending  upon  this  central 
bank  would  be  other  banks  of  a  secondary  character,  which  would  be,  as  it  were, 
a  prolongation  of  the  former  and  would  supply  it  with  the  means  of  coming  into 
touch  with  the  principal  localities,  informing  the  central  institution  as  to  their 
particular  needs  and  their  productive  ability.  Within  the  area  circumscribed 
for  these  banks  would  be  other  banks  of  a  more  specialised  character  still,  covering 
a  less  extensive  field  and  including  within  their  ambit  the  tenderer  branches  of 
the  industrial  tree.  All  wants  would  be  finally  focused  in  the  central  bank  and 
all  effort  would  radiate  from  it."  (Doctrine,  pp.  206-207.)  The  idea  is  prob- 
ably Enfantin's,  for  there  is  an  exposition  of  the  same  idea  in  Le  Producteur, 
vol.  iii,  p.  385. 

1  Doctrine,  p.  210,  note.  Elsewhere  (p.  330) :  "  We  are  weary  of  every  poli- 
tical principle  that  does  not  aim  directly  at  putting  the  destiny  of  the  people  in 
the  hands  of  the  most  able  and  devoted  among  them." 

*  "  We  come  back  with  real  joy  to  this  great  virtue,  so  frequently  miscon- 
ceived, not  to  say  misrepresented,  at  the  present  time — that  virtue  which  is  so 
easy  and  so  delightful  in  persons  who  have  a  common  aim  which  they  want  to 
attain,  but  which  is  so  painful  and  revolting  when  combined  with  egoism.  This 
virtue  of  obedience  is  one  to  which  our  thoughts  return  ercr  with  lovo,"  (Fkid., 
p.  330.) 


220       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

to  ask  what  would  become  of  the  heretics  if  ever  there  happened  to 
be  any. 

Further  criticism  of  this  kind  can  serve  no  useful  purpose,  and 
it  applies  to  every  collective  system,  differing  only  in  matters  of 
detail.  Whenever  it  is  proposed  to  set  up  an  elaborate  plan  of 
economic  activity,  directed  and  controlled  by  some  central  authority, 
with  a  view  to  supplanting  the  present  system  of  individual  initiative 
and  social  spontaneity,  we  are  met  at  the  threshold  with  the  difficulty 
of  setting  up  a  new  code  of  morality.  Instead  of  the  human  heart 
with  its  many  mixed  motives,  its  insubordination  and  weaknesses, 
in  place  of  the  human  mind  with  all  its  failings,  ignorance,  and  error, 
is  to  be  substituted  a  heart  and  mind  altogether  ideal,  which  only 
serve  to  remind  us  how  far  removed  they  are  from  anything  we  have 
ever  known.  The  Saint-Simonians  recognised  that  a  change  so 
fundamental  could  only  be  accomplished  through  the  instrumentality 
of  religion.  In  doing  this  they  have  shown  an  amount  of  foresight 
which  is  rare  among  the  critics  who  treat  their  ideas  with  such  disdain. 

It  is  more  important  that  we  should  insist  upon  another  fact, 
namely,  that  the  Saint-Simonian  system  is  the  prototype  of  all  the 
collectivist  schemes  that  were  proposed  in  the  course  of  the  century. 

The  whole  scheme  is  very  carefully  thought  out,  and  rests  upon 
that  penetrative  criticism  of  private  property  which  differentiates 
it  from  other  social  Utopias.  The  only  equality  which  the  Saint- 
Simonians  demanded  was  what  we  call  equality  of  opportunity — an 
equal  chance  and  the  same  starting-point  for  every  one.  Beyond 
that  there  is  to  be  inequality  in  the  interests  of  social  production 
itself.  To  each  according  to  his  capacity,  and  to  every  capacity 
according  to  the  work  which  it  has  accomplished — such  is  the  rule 
of  the  new  society.1 

An  interesting  risum&  of  the  Saint-Simonians'  programme,  given 
in  a  series  of  striking  formulae  which  they  addressed  to  the  President 
of  the  Chamber  of  Deputies,2  is  worth  quoting  : 

"  The  Saint-Simonians  do  not  advocate  community  of  goods, 
for  such  community  would  be  a  manifest  violation  of  the  first  moral 
law,  which  they  have  always  been  anxious  to  uphold,  and  which 

1  The  formula  in  the  third  edition  of  the  Doctrine  is  a  little  different.  "  Each 
one,"  it  runs  there,  "  ought  to  be  endowed  according  to  his  merits  and  rewarded 
according  to  his  work."  We  know  that  the  first  part  of  the  formula  refers 
to  the  distribution  of  capital,  i.e.  to  the  instruments  of  labour,  while  the 
second  refers  to  individual  incomes.  The  word  "  classed  "  was  substituted  for 
"  endowed  "  in  the  second  edition. 

'  Published  as  an  appendix  to  the  second  edition  of  the  Doctrine  dr.  Saint' 
Simon,  Exposition,  Premiere  Annie,  1820. 


CRITICISM  OF  PRIVATE  PROPERTY  221 

demands  that  in  future  every  one  shall  occupy  a  situation  becoming 
his  capacity  and  be  paid  according  to  his  labour. 

"  In  view  of  this  law  they  demand  the  abolition  of  all  privileges 
of  birth  without  a  single  exception,  together  with  the  complete 
extinction  of  the  right  of  inheritance,  which  is  to-day  the  greatest 
of  all  privileges  and  includes  every  other.  The  sole  effect  of  this 
system  is  to  leave  the  distribution  of  social  advantages  to  a  chance 
few  who  are  able  to  lay  some  pretence  to  it,  and  to  condemn  the 
numerically  superior  class  to  deprivation,  ignorance,  and  misery. 

"  They  ask  that  all  the  instruments  of  production,  all  lands  and 
capital,  the  funds  now  divided  among  individual  proprietors,  should 
be  pooled  so  as  to  form  one  central  social  fund,  which  shall  be 
employed  by  associations  of  persons  hierarchically  arranged  so 
that  each  one's  task  shall  be  an  expression  of  his  capacity  and  his 
wealth  a  measure  of  his  labour. 

"  The  Saint-Simonians  are  opposed  to  the  institution  of  private 
property  simply  because  it  inculcates  habits  of  idleness  and  fosters 
a  practice  of  living  upon  the  labour  of  others." 

(c)  Critics  of  private  property,  generally  speaking,  are  not  content 
with  its  condemnation  merely  from  the  point  of  view  either  of 
distribution  or  production.  They  almost  invariably  employ  a  third 
method  of  attack,  which  might  be  called  the  historical  argument. 
The  argument  generally  takes  the  form  of  a  demonstration  of  the 
path  which  the  gradual  evolution  of  the  institution  of  private  property 
has  hitherto  followed,  coupled  with  an  attempt  to  show  that  its 
further  transformation  along  the  lines  which  they  advocate  is  simply 
the  logical  outcome  of  that  process.  The  argument  has  not  been 
neglected  by  the  Saint-Simonians. 

The  history  of  this  kind  of  demonstration  is  exceedingly  interest- 
ing, and  the  rdle  it  has  played  in  literature  other  than  that  of  a 
socialist  complexion  is  of  considerable  importance.  Reformers  of 
every  type,  whether  the  immediate  objective  be  a  transformation  of 
private  property  or  not,  always  base  their  appeals  upon  a  philosophy 
of  history. 

Marx's  system  is  really  a  philosophy  of  history  in  which  com- 
munism is  set  forth  as  the  necessary  consummation  of  all  industrial 
evolution.  Many  modern  socialists,  although  rejecting  the  Marxian 
socialism,  still  appeal  to  history.  M.  Vandervelde  builds  his  faith 
upon  it.1  The  authors  of  that  quite  recent  work  Socialisme  en  Action 
rely  upon  it,  and  so  do  Mr.  and  Mrs.  Sidney  Webb  and  all  the  Fabian 
Socialists.  Dupont-White's  State  Socialism  is  inspired  by  similar 
1  In  bis  small  volume  Lt.  CoUeclivismf.  (Paris,  1900). 


222       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

ideas,  and  so  is  the  socialism  of  M.  Wagner.  Friedrich  List  has  a 
way  of  his  own  with  history  ;  and  the  earliest  ambition  of  the  His- 
torical school  was  to  transform  political  economy  into  a  kind  of 
philosophy  of  history.  If  we  turn  to  the  realm  of  philosophy  itself 
we  find  somewhat  similar  conceptions — the  best  known,  perhaps, 
being  Comte's  theory  of  the  three  estates,  which  was  borrowed  directly 
from  Saint-Simon.1 

This  is  not  the  place  to  discuss  historical  parallels.  The  point 
will  come  up  in  a  later  chapter  in  connection  with  the  Historical 
school.  What  we  would  remark  here  is  the  good  use  which  the  Saint- 
Simonians  made  of  the  argument.  All  the  past  history  of  property 
was  patiently  ransacked,  and  the  arguments  of  other  writers  who  have 
extolled  the  merits  of  collectivism  were  thus  effectually  forestalled. 

"  The  general  opinion  seems  to  be,"  says  the  Doctrine  de  Saint- 
Simon^  "  that  whatever  revolutions  may  take  place  in  society, 
this  institution  of  private  property  must  for  ever  remain  sacred  and 
inviolable ;  it  alone  is  from  eternity  unto  eternity.  In  reality 
nothing  could  be  less  correct.  Property  is  a  social  fact  which,  along 
with  other  social  facts,  must  submit  to  the  laws  of  progress.  Accord- 
ingly it  may  be  extended,  curtailed,  or  regulated  in  various  ways  at 
different  times."  This  principle,  once  it  was  formulated,  has  never 
failed  in  winning  the  allegiance  of  every  reformer.  Forty  years  later 
the  Belgian  economist  Laveleye,  who  has  probably  made  the  most 
thoroughly  scientific  study  of  the  question,  used  almost  identical 
words  in  summing  up  his  inquiry  into  the  principal  forms  of  property.3 

1  Littre  has  disputed  Comte'a  indebtedness  to  Saint-Simon  in  his  Augustc 
Comte  et  le  Positivisme.  Saint-Simon,  however,  in  his  preface  to  Systeme  indus- 
triel  remarks  that  in  political  matters  the  jurists  form  a  connecting  link  between 
feudal  government  on  the  one  hand  and  industrial  government  on  the  other, 
just  as  the  metaphysicians  are  intermediate  between  the  theological  and  the 
scientific  regimes.  In  a  note  which  he  adds  he  states  his  position  still  more 
clearly  (CEuvree,  vol.  v,  p.  9).  It  is  true  that  the  Systeme  indiistriel  dates  from 
1821,  and  is  consequently  subsequent  to  the  beginning  of  the  friendly  relation* 
between  Comte  and  Saint-Simon.  But  textual  evidence,  however  precise, 
cannot  decide  the  question  of  the  reciprocal  influence  which  these  two  Messiahs 
exercised  upon  one  another.  A  similar  idea  had  already  found  expression  in 
Turgot's  work. 

1  P.  179. 

1  "  Another  mistake  that  is  also  very  general  is  to  speak  of  property  as  if  it 
were  an  institution  with  a  fixed,  unchangeable  form,  while  as  a  matter  of  fact 
it  has  assumed  various  aspects  and  is  still  capable  of  further  modification  as 
yet  undreamt  of."  (Laveleye,  De  la  Propriete  et  de  ses  Formes  primitives,  1st  ed., 
1874,  p.  381.)  Stuart  Mill,  in  a  letter  addressed  to  Laveleye  on  November  17, 
1872,  congratulated  him  on  the  demonstration  he  had  given  of  this.  (Ibid., 
preface,  p.  xiii.) 


CRITICISM  OF  PRIVATE  PROPERTY  223 

The  Saint-Simonians  feel  confident  that  a  glance  at  the  progress 
of  this  evolution  is  enough  to  convince  anyone  that  it  must  have 
followed  the  lines  which  they  have  indicated.  The  conception  of 
property  was  at  first  broad  enough  to  include  men  within  its  conno- 
tation. But  the  right  of  a  master  over  his  slaves  gradually  under- 
went a  transformation  which  restricted  its  exercise,  and  finally 
caused  its  disappearance  altogether.  Reduced  to  the  right  of 
owning  things,  this  right  of  possession  was  at  first  transmissible 
simply  according  to  the  proprietor's  will.  But  the  legislature 
intervened  long  ago,  and  the  eldest  son  is  now  the  sole  inheritor. 
The  French  Revolution  enforced  equal  distribution  of  property 
between  all  children,  and  so  spread  out  the  benefits  which  the 
possession  of  the  instruments  of  production  confers.  To-day  the 
downward  trend  of  the  rate  of  interest  is  slowly  reducing  the 
advantages  possessed  by  the  owners  of  property,  and  goes  a  long 
way  towards  securing  to  each  worker  a  growing  share  of  his 
product.1  There  remains  one  last  step  which  the  Saint-Simonians 
advocate,  which  would  secure  to  all  workers  an  equal  right  to  the 
employment  of  the  instruments  of  production.  This  reform  would 
consist  in  making  everybody  a  proprietor,  but  the  State  the  sole 
inheritor.  "  The  law  of  progress  as  we  have  outlined  it  would  tend 
to  establish  an  order  of  things  in  which  the  State,  and  not  the  family, 
would  inherit  all  accumulated  wealth  and  every  other  form  of  what 
economists  call  the  funds  of  production."  2 

These  facts  might  be  employed  to  support  a  conclusion  of  an 
entirely  different  character.  That  equality  of  inheritance  which 
was  preserved  rather  than  created  by  the  French  Revolution  might 
be  taken  as  a  proof  that  modern  societies  are  tending  to  multiply  the 
number  of  individual  proprietors  by  dividing  the  land  between  an 
increasing  number  of  its  citizens.  But  such  discussion  does  not 
belong  to  a  work  of  this  kind.  We  are  entitled  to  say,  however, 
that  the  Saint-Simonian  theory  is  a  kind  of  prologue  to  all  those 
doctrines  that  ransack  the  pages  of  history  for  arguments  in 
favour  of  the  transformation,  or  even  the  suppression,  of  private 
property. 

1  Note  this  argument,  which  has  so  frequently  been  employed  by  Liberal 
economists,  and  which  we  shall  come  across  in  Basliat's  work.  The  Saint- 
Simonians  are  constantly  running  with  the  hare  as  well  as  hunting  with  the 
hounds. 

*  Doctrine,  p.  182.  The  historical  argument  of  which  we  have  just  given  a 
short  summary  is  developed  in  the  Doctrine,  pp.  179-193.  It  is  open  to  a  still 
more  fundamental  criticism,  inasmuch  as  it  does  not  seem  to  be  historically 
accurate. 


224       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

Here  again  the  Saint-Simonians  have  merely  elaborated  a  view 
which  their  master  had  only  casually  outlined.  Saint-Simon,  also 
believed  that  in  history  we  have  an  instrument  of  scientific  precision 
equal  to  the  best  that  has  yet  been  devised. 

Saint-Simon,  who  owes  something  in  this  matter  to  Condorcet. 
regarded  mankind  as  a  living  being  having  its  periods  of  infancy 
and  youth,  of  middle  and  old  age,  just  like  the  individuals  who 
compose  it.  Epochs  of  intellectual  ferment  in  the  history  of  the 
race  are  exactly  paralleled  by  the  dawning  of  intellectual  interests 
in  the  individual,  and  the  one  may  be  foretold  as  well  as  the  other. 
*'  The  future,"  says  Saint-Simon,  "  is  just  the  last  term  of  a  series 
the  first  term  of  which  lies  somewhere  in  the  past.  When  we  have 
carefully  studied  the  first  terms  of  the  series  it  ought  not  to  be 
difficult  to  tell  what  follows.  Careful  observation  of  the  past  should 
supply  the  clue  to  the  future."  1  It  was  while  in  pursuit  of  this 
object  that  Saint-Simon  stumbled  across  the  term  "industrialism" 
as  one  that  seemed  to  him  to  express  the  end  towards  which  the 
secular  march  of  mankind  appeared  to  lead.  From  family  to  city, 
from  city  to  nation,  from  nation  to  international  federation — such 
is  the  sequence  which  helps  us  to  visualise  the  final  term  of  the  series, 
which  will  be  some  kind  of  "  a  universal  association  in  which  all 
men,  whatever  other  relations  they  may  possess,  will  be  united."  s 
In  a  similar  fashion  the  Saint-Simonians  interpret  the  history  of 
individual  property  and  predict  its  total  abolition  through  a  process 
of  its  gradual  extension  to  all  individuals  combined  with  the  extinction 
of  private  inheritance. 

The  doctrine  of  the  Saint-Simonians  may  well  be  regarded  as  a 
kind  of  philosophy  of  history.3  Contemplation  of  the  system  fills 
them  with  an  extraordinary  confidence  in  the  realisation  of  their 
dreams,  to  which  they  look  forward  not  merely  with  confidence,  but 
with  feelings  of  absolute  certainty.  "  Our  predictions  have  the  same 
origins  and  are  based  upon  the  same  kind  of  foundations  as  are 

1  Saint-Simon,  Memoire  introductif  sur  aa  Contestation  avec  M.  de.  Bedern 
(1812)  ((Euvres,  vol.  i,  p.  122). 

1  Doctrine,  p.  144. 

•  The  philosophy  of  history  might  be  said  to  consist  of  attempts  to  show 
that  history  ia  made  up  of  alternating  periods  of  organic  growth  and  destructive 
criticism.  The  former  periods  are  marked  by  unity  of  thought  and  aim,  of  feeling 
and  action  in  society  ;  the  latter  by  a  conflict  of  ideas  and  sentiments,  by  political 
and  social  instability.  The  former  periods  are  essentially  religious,  the  latter 
selfish.  Reform  and  revolution  are  the  modern  manifestations  of  the  critical 
nature  of  the  period  in  which  we  live.  Saint-Simonism  would  lead  us  into  a 
definitely  organic  epoch.  Historical  evolution  seems  to  point  to  a  religious  and 
universal  association. 


THE  IMPORTANCE  OF  SAINT-SIMONISM          225 

common  to  all  scientific  discoveries."  *  They  look  upon  themselves 
as  the  conscious,  voluntary  agents  of  that  inevitable  evolution 
which  has  been  foretold  and  defined  by  Saint-Simon.2  This  is  one 
trait  which  their  system  has  in  common  with  that  of  Marx.  But 
there  are  two  important  differences.  The  Marxians  relied  upon 
revolution  consummating  what  evolution  had  begun,  while  the 
Saint-Simonians  relied  upon  moral  persuasion.*  The  Saint-Simo- 
nians,  true  children  of  the  eighteenth  century  that  they  were, 
believed  that  ideas  and  doctrines  were  sufficiently  powerful  agents 
of  social  transformation,  while  the  Marxians  preferred  to  put  their 
hope  in  the  material  forces  of  production,  ideas,  in  their  opinion, 
being  nothing  better  than  a  pale  reflection  of  such  forces.* 


Ill :  THE  IMPORTANCE  OF  SAINT-SIMONISM  IN 
THE  HISTORY  OF  DOCTRINES 

THE  doctrine  of  the  Saint-Simonians  consists  of  a  curious  mixture  of 
realism  and  Utopianism.  Their  socialism,  which  makes  its  appeal 
to  the  cultured  classes  rather  than  to  the  masses,  is  inspired,  not 
by  a  knowledge  of  working-class  life,  but  by  close  observation  and 

1  Doctrine,  p.  119. 

1  Ibid.,  p.  121.  "Man  is  not  without  some  intuitive  knowledge  of  his 
destiny,  but  when  science  has  proved  the  correctness  of  his  surmises  and  demon- 
strated the  accuracy  of  his  forecasts,  when  it  has  assured  him  of  the  legitimacy 
of  his  desires,  he  will  move  on  with  all  the  greater  assurance  and  calmness  towards 
a  future  that  is  no  longer  unknown  to  him.  Thus  will  he  become  a  free,  intelligent 
agent  working  out  his  own  destiny,  which  he  himself  cannot  change,  but  which 
he  may  considerably  expedite  by  his  own  efforts." 

*  This  is  developed  at  great  length  in  the  seventh  lecture, Doctrine,  pp.211 
et  seq. 

*  "  Politics,"  says  Saint-Simon,  "  have  their  roots  in  morality,  and  a  peopled 
institutions  are  just  the  expression  of  their  thoughts."    (CEuvres,  vol.  iii,  p.  31.) 
"  Philosophy,"  he  remarks  elsewhere,  "  is  responsible  for  the  creation  of  all  the 
more  important  political  institutions.    No  other  power  would  have  the  strength 
necessary  to  check  the  action  of  those  that  have  already  become  antiquated 
or  to  set  up  others  more  in  conformity  with  a  new  doctrine."     (Syst.  induat., 
(Euvrea,  vol.  v,  p.  167.)    He  further  insists  upon  the  part  which  philanthropists 
may  play  in  the  creation  of  a  new  society.     "  One  truth,"  he  writes,  "  that  has 
been  established  in  the  course  of  human  progress  is  this  :  a  disinterested  desire 
for  the  general  well-being  of  the  community  is  a  more  effective  instrument  of 
political  improvement  than  the  conscious  self-regarding  action  of  the  classes 
for  which  these  changes  will  prove  most  beneficial.     In  a  word,  experience  seems 
to  show  that  those  who  should  naturally  be  most  interested  in  the  establishment 
of  a  new  order  of  things  are  not  those  who  show  the  greatest  desire  to  bring  it 
about."     (CEuvres,  vol.  vi,  p.  120.)     It  would  be  difficult  to  imagine  a  neater 
refutation  of  Marxian  ideas,  especially  the  contention  that  the  emancipation  of 
the  workers  can  only  come  from  the  workers  themselves. 


226        SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

remarkable  intuition  concerning  the  great  economic  currents  of  their 
time. 

The  dispersion  of  the  school  gave  the  leaders  an  opportunity  of 
taking  an  active  part  in  the  economic  administration  of  their  own 
country,  and  we  find  them  throwing  themselves  whole-heartedly 
into  various  schemes  of  a  financial  or  industrial  character.  In  1863 
the  brothers  Pereire  founded  a  credit  association  which  became  the 
prototype  of  the  financial  institutions  of  to-day.  Enfantin  took  a 
part  in  the  founding  of  the  P.L.M.  Railway,  which  involved  an 
amalgamation  of  the  Paris-Lyons,  Lyons-Avignon,  and  Avignon- 
Marseilles  lines.  Enfantin  was  also  the  first  to  float  a  company 
for  the  purpose  of  making  a  canal  across  the  isthmus  of  Suez.  At 
the  College  de  France  Michel  Chevalier  defended  the  action  of  the 
State  in  undertaking  certain  works  of  a  public  character.  It  was  he 
also  who  negotiated  the  treaty  of  1860  with  England,  which  was  the 
means  of  inaugurating  the  era  of  commercial  liberty  for  France. 
Other  examples  might  be  cited  to  show  the  important  part  which  the 
Saint-Simonians  played  in  nineteenth-century  economic  history.1 

More  especially  did  they  realise  the  enormous  place  which  banks 
and  institutions  of  a  similar  nature  were  bound  to  have  in  modern 
industrial  organisation.  And  whatever  views  we  may  hold  as  to  the 
rights  of  property,  we  are  bound  to  recognise  how  these  deposit  banks 
have  already  become  great  reservoirs  of  capital  from  which  credit 
is  distributed  in  a  thousand  ways  throughout  the  whole  realm 
of  industry.  Some  writers,  all  of  them  by  no  means  of  the  socialist 
way  of  thinking,  would  reproach  the  banks,  especially  in  France, 
with  their  lack  of  courage  in  regulating  and  stimulating  industry, 
which,  as  the  Saint-Simonians  foresaw,  is  a  legitimate  part  of  their 
duty.2  The  important  part  which  they  saw  international  financiers 
playing  in  the  domestic  affairs  of  almost  every  European  nation 
during  the  Restoration  period,  coupled  with  their  personal  knowledge 
of  bankers,  helped  the  Saint-Simonians  in  anticipating  the  all- 
important  role  which  credit  was  to  play  in  modern  industry. 

Equally  remarkable  was  the  foresight  they  displayed  in  demand- 
ing a  more  rigorous  control  of  production,  and  in  emphasising  the 

•Cf.  on  these  points  Weill,  L'Ecole  Saint- Simoniennt  (1896),  and  Charlety, 
Histoire  du  Saint- Simonisme  (1896). 

1 "  The  object  of  credit,"  says  Enfantin  (ficonomie  politiqw  et  Politique.  p.  53), 
"  in  a  society  where  one  eet  of  people  possess  the  instruments  of  production  but 
lack  capacity  or  desire  to  employ  them,  and  where  another  have  the  desire  to 
work  but  are  without  the  means,  is  to  help  the  passage  of  these  instruments  from 
the  former's  possession  into  the  hands  of  the  latter."  No  better  definition  was 
ever  given. 


THE  IMPORTANCE  OF  SAINT-SIMONISM         227 

need  for  some  better  method  of  adapting  that  production  to  meet 
the  exigencies  of  demand  than  is  possible  under  a  competitive 
system.  The  State  obviously  has  neither  the  ability  nor  the  inclina- 
tion to  discharge  such  functions,  but  so  great  are  the  inconveniences 
of  competition  that  manufacturers  are  forced  to  enter  into  agree- 
ments with  one  another  in  order  to  exercise  some  such  control. 
This  is  nothing  less  than  a  partial  application  of  the  doctrine  of 
Saint-Simon. 

In  addition  to  the  considerable  personal  influence  which  they 
were  able  to  exercise  over  economic  development,  we  have  to  recog- 
nise that  in  their  writings  we  have  the  beginnings  both  of  the  critical 
and  of  the  constructive  contribution  made  by  socialists  to  nine- 
teenth-century economics.  Their  doctrine  is,  as  it  were,  little 
more  than  an  index  to  later  socialist  literature. 

In  the  first  place  one  must  be  struck  by  the  number  of  formulae 
to  be  met  with  in  their  work  which  have  since  become  the  common- 
places of  socialism.  "  The  exploitation  of  man  by  man "  was 
a  phrase  that  was  exceedingly  popular  up  to  1848.  The  term 
"  class  war,"  which  has  taken  its  place  since  the  time  of  Marx, 
expresses  the  same  idea.  They  spoke  of  "  the  organisation  of 
labour  "  even  before  Louis  Blanc,  and  employed  the  term  "  instru- 
ment of  labour  "  as  a  synonym  for  land  and  movable  capital  long 
before  it  was  so  used  by  Marx.  Although  we  have  not  considered  it 
necessary  to  group  them  with  the  Associationists,  they  have  been  as 
assiduous  as  any  in  proclaiming  the  superior  merits  of  producers' 
associations.  Moreover,  they  anticipated  the  use  which  the  socialists 
would  make  of  the  theory  of  rent.  In  a  curious  passage  written 
long  before  the  time  of  Henry  George  they  refer  to  the  possibility  of 
applying  the  doctrines  of  Ricardo  and  Malthus  to  justify  the  devotion 
of  the  surplus  produce  of  good  land  to  the  general  needs  of  society, 
thus  anticipating  the  theory  of  another  prominent  socialist  thinker.1 
Other  ideas  might  be  mentioned,  though  not  of  a  specifically  socialist 
character.  Thus  the  theory  of  profit-sharing,  as  far  as  our  knowledge 
goes,  was  first  developed  in  an  article  in  Le  Producteur.* 

The  more  one  examines  the  doctrines  of  the  Saint-Simonians 
the  more  conscious  does  one  become  of  the  remarkable  character 
of  these  anticipations  and  of  the  injustice  of  the  oblivion  which  has 

1  Doctrine,  p.  226.  Cf .  p.  223  for  an  eloquent  passage  denouncing  Ricardo  and 
Malthus,  who,  as  the  result  of  their  "  profound  researches  into  the  question  of 
rent,"  undertake  to  defend  the  institution  of  private  property. 

*  The  article  is  entitled  De  la  Clause  ouvri&re,  and  may  be  found  in  vol.  iT 
of  Le  Producteur.  See  particularly  pp.  308  et  aeq. 


228       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

since  befallen  them.  Marx's  friend  Engels  called  attention  to  the 
*'  genial  perspicacity  of  Saiifc-Simon,  which  enabled  him  to  antici- 
pate all  the  doctrines  of  subsequent  socialists  other  than  those  of  a 
specifically  economic  character."  1  The  specifically  economic  idea  of 
which  Engels  speaks  and  which  Saint-Simon,  in  his  opinion,  did 
wrong  to  neglect  was  the  Marxian  theory  of  surplus  value.  We  are 
inclined  to  the  opinion  that  it  was  more  of  a  merit  than  a  fault  to 
place  socialism  on  its  real  foundation,  which  must  necessarily  be  a 
social  one,  rather  than  to  found  it  upon  an  erroneous  theory  of 
value. 

But  new  formulae  are  not  their  only  contribution.  Due  note 
was  taken  of  that  fundamental  opposition  which  exists  between 
economists  and  socialists  and  which  has  caused  all  the  conflicts  and 
misunderstandings  that  disfigure  the  history  of  the  century  and 
resulted  in  their  speaking  an  entirely  different  language.  We  shall 
try  to  define  the  nature  of  the  conflict,  in  order,  if  possible,  to  help 
the  reader  over  the  difficulties  that  arise  just  where  the  bifurcation 
of  economic  thought  takes  place. 

No  attempt  was  made  either  by  Adam  Smith,  Ricardo,  or  J.  B. 
Say  to  make  clear  the  distinction  between  the  science  of  political 
economy  and  the  fact  of  social  organisation.2  Property,  as  we  have 
already  had  occasion  to  remark,  was  a  social  fact  that  was  accepted  by 
them  without  the  slightest  demur.  The  methods  of  dividing  property 
and  of  inheriting  it,  the  causes  that  determined  its  rise  and  the  conse- 
quences that  resulted  from  its  existence,  were  questions  that  remained 
outside  the  scope  of  their  discussions.  By  division  or  distribution 
of  wealth  they  meant  simply  the  distribution  of  the  annual  revenue 
between  the  various  factors  of  production.  Their  interest  centres 
round  problems  concerning  the  rate  of  interest  or  the  rate  of  wages 
or  the  amount  of  rent.  Their  theory  of  distribution  is  simply  a 
theory  concerning  the  price  of  services.  No  attention  was  paid  to 
individuals,  the  social  product  being  supposed  to  be  divided  between 
impersonal  factors — land,  capital,  and  labour — according  to  certain 
necessary  laws.  For  convenience  of  discussion  the  impersonal  occa- 
sionally becomes  personal,  as  when  they  speak  of  proprietors,  capi- 
talists, and  workers,  but  that  is  not  allowed  to  affect  the  general  trend 
of  the  argument. 

1  Engels,  Herrn  Eugen  Dtihrings  Umwdhung  der  Wissenschaft,  p.  277. 

*  "  The  majority  of  economists,  and  especially  Say,  whose  work  we  have  lust 
reviewed,  regard  property  as  a  fixed  factor  whose  origin  and  progress  is  no  concern 
of  theirs,  but  whose  social  utility  alone  concerns  them.  The  conception  of  a 
distinctively  social  order  is  more  foreign  still  to  the  English  writers."  (Doctrine, 
pp.  221  and  223.)  No  exception  is  made  in  favour  of  Sismondi  or  Turgot, 


THE  IMPORTANCE  OF  SAINT-SIMONISM         229 

For  the  Saint-Simonians,  on  the  other  hand,  and  for  socialists 
in  general  the  problem  of  distribution  consists  especially  in  knowing 
how  property  is  distributed.  The  question  is  to  determine  why 
some  people  have  property  while  others  have  none  ;  why  the  instru- 
ments of  production,  land,  and  capital  should  be  so  unevenly  dis- 
tributed, and  why  the  revenues  resulting  from  this  distribution 
should  be  unequal.  For  a  consideration  of  the  abstract  factors 
of  production  the  socialists  are  anxious  to  substitute  the  study  of 
actual  living  individuals  or  social  classes  and  the  legal  ties  which 
bind  them  together.  These  differing  conceptions  of  distribution 
have  given  rise  to  two  different  problems,  the  one  primarily  economic, 
the  other  social,  and  sufficient  care  has  not  always  been  taken  to 
distinguish  between  these  two  currents,  which  have  managed  to 
coexist,  much  to  the  confusion  of  social  thinking  in  the  nineteenth 
century. 

Another  essential  difference  between  their  respective  points  of 
view  consists  of  the  different  manner  in  which  economists  and 
socialists  conceive  of  the  opposition  that  exists  between  the  general 
interest  and  the  interests  of  individuals. 

Classical  writers  envisaged  it  as  a  conflict  between  the  interests 
of  consumers,  i.e.  everybody,  and  the  interests  of  producers,  which 
are  more  or  less  the  interests  of  a  particular  class. 

The  Saint-Simonians,  on  the  other  hand — and  in  this  mattei 
their  distinction  has  met  with  the  hearty  approval  of  every  socialist — 
think  it  better  to  regard  it  as  between  workers  on  the  one  hand  and 
idlers  on  the  other,  or  between  workers  and  capitalists,  to  adopt  the 
cramped  formula  of  a  later  period.  The  worker's  is  the  general 
interest ;  the  particular  interest  is  that  of  the  idler  who  lives  at 
the  former's  expense.  "  We  have  on  several  occasions,"'  writes 
Enfantin,  "  pointed  out  some  of  the  errors  in  the  classification 
adopted  by  most  present-day  economists.  The  antithesis  between 
producer  and  consumer  gives  a  very  inadequate  idea  of  the  magni- 
tude of  the  gap  that  lies  between  the  various  members  of  society, 
and  a  better  differentiation  would  be 'that  which  would  treat  them 
as  workers  and  idlers."  l  The  difference  in  the  point  of  view  naturally 
results  in  an  entirely  different  conception  of  social  organisation. 
Economists  think  that  society  ought  to  be  organised  from  the  point 
of  view  of  the  consumer  and  that  the  general  interest  is  fully 
realised  when  the  consumer  is  satisfied.  Socialists,  on  the  contrary, 
believe  that  society  should  be  organised  from  the  standpoint  of  the 
worker,  and  that  the  general  interest  is  only  fully  achieved  when  the 
1  Le  Producttur,  vol.  iii,  p.  385. 


230       SAINT-SIMON  AND  THE  SAINT-SIMONIANS 

workers  draw  their  full  share  of  the  social  product,  which  is  as  great 
as  it  possibly  can  be.1 

There  is  one  last  element  of  difference  which  is  very  important. 
Classical  writers  made  an'attempt  to  reduce  the  apparent  disorder 
of  individual  action  within  the  compass  of  a  few  scientific  laws. 
By  the  time  the  task  was  completed  so  struck  were  they  with 
the  profound  harmony  which  they  thought  they  had  discovered 
that  they  renounced  all  attempts  at  amelioration.  They  were  so 
satisfied  with  the  demonstration  which  they  had  given  of  the  way 
in  which  a  spontaneous  social  force,  such  as  competition,  for  example, 
tended  to  limit  individual  egoism  and  to  complete  the  triumph  of 
the  general  interest  that  they  never  thought  of  inquiring  whether 
the  action  of  these  forces  might  not  be  rendered  a  little  less  harmful 
or  whether  the  mechanism  might  not  with  advantage  be  lubricated 
and  made  to  run  somewhat  more  smoothly. 

The  Saint-Simonians,  on  the  other  hand — and  in  this  matter  it 
is  necessary  to  couple  with  theirs  the  name  of  Sismondi — are  con- 
vinced of  the  slowness,  the  awkwardness,  and  the  cruelty  with  which 
spontaneous  economic  forces  often  go  to  work.  Consequently  they 
are  concerned  with  the  possibility  of  substituting  a  more  conscious, 
carefully  thought-out  effort  on  the  part  of  society.  Instead  of  a 
spontaneous  reconciliation  of  conflicting  interests  they  suggest  an 
artificial  reconciliation,  which  they  strive  with  all  their  might  to 
realise.  Hence  the  innumerable  attempts  to  set  up  a  new  mechanism 
which  might  take  the  place  of  the  spontaneous  mechanism,  and  the 
childish  efforts  to  co-ordinate  or  combine  economic  forces.  These 
attempts,  most  of  them  of  necessity  unsuccessful,  furnished  the 
adversaries  of  socialism  with  their  best  weapons  of  attack.  All  of 
them,  however,  did  not  prove  quite  fruitless,  and  some  of  them  were 
destined  to  exercise  a  notable  influence  upon  social  development. 

It  is  in  the  Saint-Simonian  doctrine  that  we  find  these  contrasts 
between  political  economy  and  socialism  definitely  marked  and  in 
full  detail.  It  matters  little  to  us  to-day  that  the  school  was  ridi- 

1  In  the  preface  to  Sconomie  politique  et  Politique,  Enfantin  again  writes  I 
"  All  questions  of  political  economy  should  be  linked  together  by  a  common 
principle,  and  in  order  to  judge  of  the  social  utility  of  a  measure  or  idea  in 
economics  it  is  absolutely  necessary  to  consider  whether  this  idea  or  measure  is 
directly  advantageous  to  the  workers  or  whether  it  indirectly  contributes  to  the 
amelioration  of  their  lot  by  discrediting  idleness."  It  is  a  pleasure  to  be  able  to 
concur  in  the  opinion  expressed  by  M.  Halevy  in  his  article  on  Saint-Simon 
(Revue  du  Mois  for  December  1907),  in  which  he  maintains  that  this  idea  is  the 
distinctive  trait  of  Saint-Simon's  socialism.  We  have  already  called  attention 
to  another  feature  that  seems  to  us  equally  important,  namely,  the  suggested 
substitution  of  industrial  administration  for  political  government. 


THE  ASSOCIATIVE  SOCIALISTS  231 

culed  or  that  the  eccentricities  of  Enfantin  destroyed  his  propaganda 
work  just  when  Fourier  was  pursuing  his  campaign  with  great 
success.  Ideas  are  the  things  that  stand  out  in  a  history  of  doctrines. 
To  us,  at  any  rate,  Saint-Simonism  appears  as  the  first  and  most 
eloquent  as  well  as  the  most  penetrating  expression  of  the  sentiments 
and  ideals  that  inspire  nineteenth-century  socialism.1 


CHAPTER  III:  THE  ASSOCIATIVE  SOCIALISTS 

THE  name  "  Associative  Socialists  "  is  given  to  all  those  writers  who 
believe  that  voluntary  association  on  the  basis  of  some  preconceived 
plan  is  sufficient  for  the  solution  of  all  social  questions.  Unfor- 
tunately the  plans  vary  very  considerably,  according  to  the  particular 
system  chosen. 

They  differ  from  the  Saint-Simonians,  who  sought  the  solution 
in  socialisation  rather  than  in  association,2  and  thus  became 
the  founders  of  collectivism,  which  is  quite  another  thing.  The 
advocates  of  socialisation  always  thought  of  "  Society "  with  a 
capital  S,  and  of  all  the  members  of  the  nation  as  included  in  one 
collective  organisation.  The  term  "  nationalisation  "  much  better 
describes  what  they  sought.  Associationism,  on  the  other  hand, 
more  individualistic  in  character  and  fearing  lest  the  individual 
should  be  merged  in  the  mass,  would  have  him  safeguarded  by 
means  of  small  autonomous  groups,  where  federation  would  be 
entirely  voluntary,  and  any  unity  that  might  exist  would  be  prompted 
from  within  rather  than  imposed  from  without. 

On  the  other  hand,  the  Associationists  must  be  carefully  distin- 
guished from  the  economists  of  the  Liberal  school.  Fortunately  this 

1  It  is  impossible  not  to  make  a  special  mention  of  Anton  Menger's  excellent 
little  book.  Das  Recht  auf  den  votten  Arbeitsertrag  (1886)  (the  English  translation, 
with  an  excellent  introduction  by  Professor  Foxwell,  is  unfortunately  out  of 
print).  It  is  indispensable  in  any  history  of  socialism.  We  must  also  mention, 
with  deep  acknowledgments,  P&Teto'sLesSystemessocialisles  (Paris,  1902,  2  vols.) 
— the  most  originally  critical  work  yet  published  on  this  subject,  though  not 
always  the  most  impartial — and  Bour gum's  Les  Systemes  socialists  et  revolution 
tconomique  (Paris,  1 906),  as  containing  t  he  most  scientific  criticism  of  the  economic 
theories  of  socialism. 

*  "  Association,  which  is  destined  to  put  an  end  to  antagonism,  has  not  yet 
found  its  true  form.  Hitherto  it  has  consisted  of  separate  groups  which  have 
been  at  war  with  one  another.  Accordingly  antagonism  has  not  yet  become 
extinct,  but  it  certainly  will  as  soon  as  association  has  become  universal." 
(Doctrine  de  Saivi-Sinm,  Exposition,  Premiere  Annte.,  p.  177.) 


232  THE  ASSOCIATIVE  SOCIALISTS 

is  not  very  difficult,  for  by  means  of  these  very  associations  they 
claim  to  be  able  to  create  a  new  social  milieu.  They  are  as  anxious 
as  the  Liberals  for  the  free  exercise  of  individual  initiative,  but  they 
believe  that  under  existing  conditions,  except  in  the  case  of  a  few 
privileged  individuals,  this  very  initiative  is  being  smothered.  They 
believe  that  liberty  and  individuality  never  can  expand  unless  trans- 
planted into  a  new  environment.  But  this  new  environment  will 
not  come  of  itself.  It  must  be  created,  just  as  the  gardener  must 
build  a  conservatory  if  he  is  to  secure  a  requisite  environment. 
Each  one  has  his  own  particular  recipe  for  this,  and  none  of  them  is 
above  thinking  that  his  own  is  the  best.1  It  is  this  conception  of  an 
artificial  society  set  up  in  the  midst  of  present  social  conditions, 
bound  by  strict  limitations  which  to  some  extent  isolate  it  from  its 
surroundings,  that  has  won  for  the  system  its  name  of  Utopian 
Socialism. 

Had  the  Associationists  only  declared  that  the  social  environment 
can  and  ought  to  be  modified,  despite  the  so-called  permanent  and 
immutable  laws,  just  as  man  himself  is  capable  of  modification,  they 
would  have  enunciated  an  important  truth  and  would  have  forestalled 
all  those  who  are  to-day  seeking  a  solution  of  the  social  question  in 
syndicalism,  in  co-operation,  and  in  the  garden-city  ideal. 

On  the  other  hand,  had  they  succeeded  in  carrying  out  their 
plans  on  an  extensive  scale,  if  we  may  judge  by  the  desire  to  evade 
them  on  the  part  of  those  experimented  on,  it  seems  probable  that 
the  new  kind  of  liberty  would  have  proved  less  welcome  than  the 
liberty  which  is  enjoyed  under  the  present  constitution  of  society. 

They  would  have  been  very  indignant,  however,  if  anyone  had 
charged  them  with  desiring  to  create  an  artificial  society.  On  the 
contrary,  their  claim  was  that  the  present  social  environment  is 
artificial,  and  that  their  business  was  not  to  create  but  merely  to 
discover  that  other  environment  which  is  already  so  wonderfully 
adapted  to  the  true  needs  of  mankind  in  virtue  of  its  providential, 
natural  harmony.  At  bottom  it  is  the  same  idea  as  the  "  natural 
order  "  of  the  Physiocrats,  much  as  their  conception  differs  from 
that  of  the  Physiocrats — an  incidental  proof  that  the  order  is 
anything  but  "  natural,"  seeing  that  it  varies  with  those  who 

1  In  Owen's  paper,  the  Economist,  for  August  11,  1821,  we  meet  with  the 
following  words  :  "  The  secret  is  out !  .  .  .  The  object  sought  to  bs  obtained 
is  not  equality  in  rank  or  possessions,  is  not  community  of  goods,  but  full,  com- 
plete, unrestrained  co-operation  on  the  part  of  all  the  members  for  every  purpose 
of  social  life."  Fourier  writes  in  a  similar  strain  :  "  Association  holds  the  secret 
of  the  union  of  interests."  (Assoc.  dom,estique,  vol.  i,  p.  133.)  Elsewhere  he 
writes  :  "  To-day,  Good  Friday,  I  discovered  the  secret  of  association." 


THE  ASSOCIATIVE  SOCIALISTS  233 

define  it.  Some  of  their  sayings,  however,  might  very  well  have 
been  borrowed  directly  from  Quesnay  or  Mercier  de  la  Riviere — for 
example,  that  of  Owen's  in  which  he  speaks  of  the  commune  as  God's 
special  agent  for  bringing  society  into  harmony  with  nature.  It  is 
just  the  "  good  despot  "  of  the  Physiocrats  over  again.  Or  take 
Fourier's  comparison  in  which  he  ranks  himself  with  Newton  as  the 
discoverer  of  the  law  of  "  attraction  of  passion,"  and  believes  that 
his  "  stroke  of  genius,"  as  Zola  calls  it,  lies  in  knowing  how  to  utilise 
the  passions  which  God  has  given  us  to  the  best  advantage. 

What  is  still  more  interesting  is  that  this  newer  socialism  marks 
a  veritable  reaction  against  the  principles  of  1789.1  The  Revolu- 
tionists hated  every  form  of  association,  and  suspected  it  of  being  a 
mere  survival  of  the  old  regime,  &  chain  to  bind  the  individual. 
Not  only  was  it  omitted  from  the  Declaration  of  the  Rights  of  Man,8 
but  it  was  formally  prohibited  in  every  province — prohibitions  which 
have  been  withdrawn  only  quite  recently.  It  is  difficult  to  imagine  a 
greater  contrast  to  the  spirit  of  the  Revolution  than  the  beliefs  which 
inspired  Owen,  Fourier,  and  Cabet,  the  founders  of  the  new  order. 

But  the  men  of  1789  were  not  so  far  wrong,  nor  were  they  deceived 
by  their  recollections  of  corporations  and  guilds,  when  they  expressed 
the  belief  that  any  form  of  association  was  really  a  menace  to  liberty. 
There  is  an  old  Italian  proverb  which  states  that  every  man  who 
has  an  associate  has  also  a  master.  The  Liberal  school  has  to  a 
certain  extent  always  shared  these  apprehensions,  and  ample  justifi- 
cation might  be  found  for  them  in  the  many  despotic  acts  of 
associates,  whether  capitalists  or  workmen. 

But  the  "  associative  "  socialists  of  the  early  part  of  the  last 
century  were  impressed,  even  more  than  Sismondi  and  Saint-Simon 
were,  by  the  new  phenomenon  of  competition.  The  mortal  struggle 
for  profit  among  producers  and  the  keen  competition  for  wages 
among  working  men  which  immediately  ensued  upon  the  disap- 
pearance of  the  old  framework  of  society  seemed  to  them  to  wear 
all  the  hideousness  of  an  apocalyptic  beast.  With  wonderful  per- 
spicacity they  predicted  that  such  breakneck  competition  must 

1  On  the  relations  of  socialism  to  the  French  Revolution  see  the  preceding 
chapter  on  Saint -Simon  (p.  109,  note). 

*  The  Declaration  of  the  Rights  of  Man  speaks  of  liberty,  property,  resistance 
to  oppression,  but  there  is  not  a  word  about  the  right  of  association.  Trade 
association,  one  of  the  oldest  and  most  democratic  forms  of  association,  WAS 
proscribed  by  the  famous  decree  of  Le  Chapelier  (1791),  and  severe  penalties 
were  imposed  upon  associations  of  more  than  twenty  persons  by  the  Penal 
Code  of  1810.  These  prohibitions  were  gradually  removed  in  the  course  of  the 
nineteenth  century.  Friendly  societies  were  the  first  to  be  set  free,  then  followed 
trade  unions,  but  these  laws  were  not  definitely  repealed  until  July  1,  1901, 


234  THE  ASSOCIATIVE  SOCIALISTS 

inevitably  result  in  combination  and  monopoly.1  Voluntary  associa- 
tion of  a  co-operative  character  (they  paid  hardly  any  attention  to 
the  possibilities  of  corporative  association)  appeared  to  supply  the 
only  means  of  suppressing  this  competition  without  either  endanger- 
ing liberty  or  thwarting  the  legitimate  ambitions  of  producers.  And 
it  is  not  very  clear  as  yet  that  they  were  altogether  mistaken  in  their 
point  of  view. 

The  two  best  known  representatives  of  this  school  are  Robert 
Owen  and  Charles  Fourier.  Although  they  were  contemporaries — 
the  one  was  born  in  1771,  the  other  in  1772  2 — it  does  not  appear  that 
they  ever  became  known  to  one  another.  Owen  never  seems  to 
have  paid  any  attention  to  Fourier's  system,  and  Fourier  never  refers 
to  "  Owen's  communistic  scheme  "  without  showing  some  trace  of 
bitterness.  Indeed,  it  is  doubtful  whether  he  knew  anything  at  all 
about  it  except  from  hearsay.3 

Such  reciprocal  ignorance  does  little  credit  to  their  powers  of 
observation.  Still  it  is  easily  explained.  Despite  a  certain  simi- 
larity in  their  plans  for  social  regeneration — for  example,  they  both 
proceed  to  create  small  autonomous  associations,  the  microcosms 
which  were  to  serve  as  models  for  the  society  of  the  future,  or 
the  yeast  which  was  to  leaven  the  lump — and  notwithstanding 
that  after  their  deaths  they  were  both  hailed  as  the  parents  of  one 
common  offspring,  co-operation,  they  spent  their  whole  lives  in 
two  very  different  worlds.  Without  any  rhetorical  exaggeration  and 
without  making  any  invidious  distinctions  we  may  truthfully  say 
that  Owen  was  a  rich,  successful  manufacturer  and  one  of  the 
greatest  and  most  influential  men  of  his  day  and  country,  while 
Fourier  was  a  mere  employee  in  the  realm  of  industry,  or  a  "  shop- 
sergeant,"  as  he  liked  to  call  himself.  Later  on  Fourier  became  the 
recipient  of  a  small  annuity ;  but  his  reputation  only  spread  slowly 

1  "  It  is  obvious  that  the  present  regime  of  free  competition  which  is  supposed 
to  be  necessary  in  the  interests  of  our  stupid  political  economy,  and  which  is 
further  intended  to  keep  monopoly  in  check,  must  result  in  the  growth  of 
monopoly  in  almost  every  branch  of  industry."  (Victor  Considerant,  Principe* 
de  Socialisme.) 

1  Fourier's  first  book,  Les  Quatre  Mouvements,  was  published  in  1808,  and 
his  last,  La  Fausse  Industrie,  in  1836.  Owen's  earliest  work,  A  New  View  of 
Society ;  or  Essays  on  the  Formation  of  Human  Character,  was  published  in 
1813,  and  his  last  work,  The  Human  Race  governed  without  Punishment,  in 
1858. 

•  "According  to  details  supplied  by  journalists,  Owen's  establishments  seem 
to  have  at  leaat  three  serious  drawbacks  which  must  inevitably  destroy  the  whole 
enterprise — the  numbers  are  excessive,  equality  is  one  of  hi«  ideals,  and  there 
ia  no  reference  to  agriculture,"  (Unite  universette,  rol.  ii,  p.  35  ) 


ROBERT  OWEN  285 

and  with  much  difficulty  among  a  small  circle  of  friends.  Contrary 
to  what  might  have  been  expected,  the  millionaire  manufacturer  was 
the  more  ardent  socialist  of  the  two.  A  militant  communist  and  an 
anti-cleric,  he  loved  polemics,  and  advanced  his  views  both  in  the 
Press  and  on  the  platform.  His  humble  rival  was  just  a  grown-up 
boy  with  the  habits  of  an  old  woman.  He  scarcely  ever  left  his 
house  except  to  listen  to  a  military  band  ;  he  wrote  sedulously, 
attempting  to  turn  out  the  same  number  of  pages  each  day,  and 
spent  most  of  his  life  on  the  look-out  for  a  sleeping  partner,  who, 
unfortunately,  never  turned  up. 

Other  writers  of  whom  we  shall  have  something  to  say  in  connec- 
tion with  this  school  are  Louis  Blanc,  Leroux,  and  Cabet. 


I :   ROBERT  OWEN 

ROBERT  OWEN  of  all  socialists  has  the  most  strikingly  original,  not 
to  say  unique,  personality.  One  of  the  greatest  captains  of  industry 
of  his  time,  where  else  have  we  such  a  commanding  figure  ?  Nor 
is  his  socialism  simply  the  philanthropy  of  the  kind-hearted 
employer.  It  is  true  that  it  is  not  revolutionary,  and  that  he 
could  not  bring  himself  to  support  the  Chartist  movement,  which 
seems  harmless  enough  now.1  He  never  suggested  expropriation 
as  an  ideal  for  working  men,  but  he  exhorted  them  to  create  new 
capital,  and  it  is  just  here  that  the  co-operative  programme  differs 
from  the  collectivist  even  to  this  day.  But  for  all  practical  purposes 
Owen  was  a  socialist,  even  a  communist.  Indeed,  he  was  probably 
the  first  to  inscribe  the  word  "  socialism  "  on  his  banner.2 

1  Despite  the  fact  that  Chartism  was  essentially  a  working-class  movement, 
controlled  by  the  Working  Men's  Association,  its  demands  were  exclusively 
political,  the  chief  of  them  being  universal  suffrage. 

2  It  is  quite  possible  that  Owen  regarded  the  term  as  his  own  invention,  but 
we  now  know  that  it  had  been  previously  employed  by  Pierre  Leroux,  the  French 
socialist.    The  publication  of  Owen's  What  is  Socialism  f  in  1841,  however,  ia 
the  earliest  instance  of  the  term  being  employed  as  the  title  of  a  book. 

Owen  lived  an  extremely  active  life,  and  died  in  1857  at  the  advanced  age 
of  eighty-seven.  Of  Welsh  artisan  descent,  he  began  life  as  an  apprentice  in  a 
cotton  factory,  setting  up  as  a  master  spinner  on  his  own  account  with  a  capital 
of  £100,  which  he  had  borrowed  from  his  father.  His  rise  was  very  rapid,  and  at 
the  age  of  thirty  he  found  himself  co-proprietor  and  director  of  the  New  Lanark 
Mills.  It  was  then  that  he  first  made  a  name  for  himself  by  his  technical  im- 
provements and  his  model  dwellings  for  his  workmen.  It  was  at  this  period 
that  his  ideas  on  education  also  took  shape.  By  and  by  it  became  the  fashion 
to  make  a  pilgrimage  to  view  the  factory  at  New  Lanark,  and  among  the  visitor* 
were  several  very  distinguished  people.  His  correspondents  also  included  more 


236  THE  ASSOCIATIVE  SOCIALISTS 

His  passion  for  Utopias  did  not  prevent  him  initiating  a  number 
of  reforms  and  establishing  several  institutions  of  a  thoroughly 
practical  character.  Special  mention  ought  to  be  made  of  his 
interest  in  the  welfare  of  his  workers,  an  inspiration  that  has  been 
caught  by  several  manufacturers  since. 

Nor  must  we  imagine,  simply  because  we  have  placed  him  along 
with  the  Associative  socialists,  that  association  was  the  only  solution 
that  met  with  his  approval.  As  a  matter  of  fact  there  is  scarcely 
a  solution  of  any  description  which  was  not  to  some  extent  tried 
by  him. 

Beginning  with  the  establishment  of  model  workshops  in  his 
factory  at  New  Lanark,  there  is  hardly  a  suggestion  incorporated 
in  his  exposition  of  socialism  which  was  not  attempted  and  even 
successfully  applied  in  the  course  of  his  experiments  there.  Among 
them  are  included  such  important  developments  as  workmen's 
dwellings,  refectories,  the  appointment  of  officials  to  look  after  the 
social  and  moral  welfare  of  the  workers,  etc. 

These  experiments  had  the  further  distinction  of  serving  as  a 

than  one  royal  personage.  Among  these  we  may  specially  mention  the  King 
of  Prussia,  who  sought  his  advice  on  the  question  of  education,  and  the  King  of 
Holland,  who  consulted  him  on  the  question  of  charity. 

The  crisis  of  1815  revealed  to  Owen  the  serious  defects  in  the  economic  order, 
and  this  marks  the  beginning  of  the  second  period  of  his  life,  when  he  dabbled 
in  communal  experiments.  In  1825  he  founded  the  colony  of  New  Harmony 
in  Indiana,  and  the  same  year  witnessed  the  establishment  of  another  colony 
at  Orbiston,  in  Scotland.  But  these  lasted  only  for  a  few  years.  In  1832  we 
have  the  National  Equitable  Labour  Exchange,  which  was  not  much  more 
successful. 

Owen,  sixty -three  years  of  age,  and  thoroughly  disappointed  with  his  experi- 
ments, but  as  convinced  as  ever  of  the  truth  of  his  doctrines,  entered  now  upon 
the  third  period  of  his  life,  which,  as  it  happened,  was  to  be  a  fairly  long  one. 
This  period  was  to  be  devoted  wholly  to  propagating  the  gospel  of  the  New 
Moral  World — The  New  Moral  World  being  the  title  of  his  chief  work  and  of 
the  newspaper  which  he  first  published  towards  the  end  of  1834.  He  took  an 
active  part  in  the  Trade  Union  movement,  but  does  not  seem  to  have  been 
much  interested  in  the  co-operative  experiments  which  were  started  by  the 
Rochdale  Pioneers  in  1844,  although  curiously  enough  this  is  his  chief  claim 
to  fame. 

Owen  was  in  no  sense  a  litterateur,  being  essentially  a  man  of  affairs,  and  we 
are  not  surprised  to  find  that  the  number  of  books  which  he  has  left  behind  him 
is  email.  But  he  was  an  indefatigable  lecturer,  and  wrote  a  good  deal  for  the 
press.  We  must  confess,  however,  that  it  is  not  easy,  as  we  read  his  addresses 
and  articles  to-day,  to  account  for  the  wonderful  contemporary  success  which 
they  had. 

There  is  an  excellent  French  work  by  Dolleans  dealing  with  his  life  and 
doctrines  (1907).  The  best  English  life,  that  of  Podmore,  is  unfortunately  out 
of  print. 


ROBERT  OWEN  237 

model  for  the  factory  legislation  of  the  next  fifty  years.  We  have 
only  to  glance  at  the  following  programme  of  reforms  effected  by 
him  to  realise  this  : 

1.  He  reduced  the  hours  of  labour  from  seventeen  to  ten  per  diem. 

2.  No  children  under  ten  years  of  age  were  employed,  but  free 
education  was  supplied  them  in  schools  built  for  the  purpose. 

3.  All  fines — then  a  common  feature  of  all  workshops — were 
abolished.1 

Seeing  that  neither  his  experiments  nor  his  prestige  as  an  employer 
was  sufficient  to  influence  his  fellow  employers,  he  now  tried  to  gain 
the  sympathetic  attention  of  the  legislature.  He  turned  first  of  all 
to  the  British  Government,  and  then  to  that  of  other  countries, 
looking  to  legislation  to  provide  what  he  believed  should  have  been 
supplied  by  the  goodwill  of  the  ruling  classes  themselves. 

Even  before  the  days  of  Lord  Shaftesbury  he  had  inaugurated  a 
campaign  in  favour  of  limiting  the  hours  of  children  working  in 
factories.  In  1819  the  first  Factory  Act  was  passed,  fixing  the 
minimum  age  at  which  children  might  be  employed  at  nine  years, 
although  Owen  himself  would  have  put  it  at  ten. 

Discouraged  by  the  little  support  which  he  obtained  for  his 
projects,  and  having  satisfied  himself  as  to  the  impotence  both  of 
patronage  and  legislation  as  forces  of  social  progress,  he  turned  his 
attention  to  a  third  possibility,  namely,  association.  Association, 
he  imagined,  would  create  that  new  environment  without  which 
no  solution  of  the  social  question  was  ever  possible. 

1.  THE  CREATION  OF  THE  MILIEU 

The  creation  of  a  social  milieu  was  the  one  impelling  force  that 
inspired  all  Owen's  various  experiments.  This  was  his  one  desire, 

1  To  his  fellow-employers  who  complained  of  his  almost  revolutionary 
proposals  Owen  made  reply  as  follows — and  his  words  are  quite  as  true  now  as 
they  were  then :  "  Experience  must  have  taught  you  the  difference  between  an 
efficiently  equipped  factory  with  its  machinery  always  clean  and  in  good  working 
order  and  one  in  which  the  machinery  is  filthy  and  out  of  repair  and  working 
only  with  the  greatest  amount  of  friction.  Now  if  the  care  which  you  bestow 
upon  machinery  can  give  you  such  excellent  results,  may  you  not  expect  equally 
good  results  from  care  spent  upon  human  beings,  with  their  infinitely  superior 
structure  ?  Is  it  not  quite  natural  to  conclude  that  these  infinitely  more  delicate 
and  complex  mechanisms  will  also  increase  in  force  and  efficiency  and  will  be 
really  much  more  economical  if  they  are  kept  in  good  working  condition  and 
treated  with  a  certain  measure  of  kindness  ?  Such  kindness  would  do  much  to 
remove  the  mental  friction  and  irritation  which  always  results  whenever  the 
nourishment  is  insufficient  to  keep  the  body  in  full  productive  efficiency,  as  well 
as  to  arrest  deterioration  and  to  prevent  premature  death." 


238  THE  ASSOCIATIVE  SOCIALISTS 

whether  he  asked  it  of  the  masters,  the  State,  or  of  the  workers 
themselves. 

He  has  thus  some  claim  to  be  regarded  as  the  father  of  etiology 
— etiology  being  the  title  given  by  sociologists  to  that  part  of  their 
subject  which  treats  of  the  subordination  and  adaptation  of  man  to 
his  environment.  His  theory  concerning  the  possibility  of  trans- 
forming the  organism  by  influencing  its  surroundings  occupies  the 
same  position  in  economics  as  Lamarck's  theory  does  in  biology.  By 
nature  man  is  neither  good  nor  bad.  He  is  just  what  his  environ- 
ment has  made  him,  and  if  at  the  present  moment  he  is  on  the  whole 
rather  bad,  it  is  simply  because  his  environment  is  so  detestable. 
Scarcely  any  stress  is  laid  upon  the  natural  environment  which 
seemed  of  such  supreme  importance  to  writers  like  Le  Play.  Owen's 
interest  was  in  the  social  environment,  the  product  of  education  and 
legislation  or  of  deliberate  individual  action.1  Change  the  environ- 
ment and  the  individual  would  be  changed.  He  failed  to  see  that 
this  meant  begging  the  whole  question.  If  man  is  simply  the 
product  of  his  environment,  how  can  he  possibly  change  that  environ- 
ment ?  It  is  like  asking  a  man  to  raise  himself  by  the  hair  of  his 
head.  But  the  futility  of  such  criticism  will  be  readily  appreciated 
if  we  remind  ourselves  that  it  is  to  such  insignificant  beginnings 
as  these  that  we  owe  the  conception  of  the  garden  city.  It  was 
Owen's  concern  for  the  worker  and  his  great  desire  to  provide 
him  with  a  home  where  some  degree  of  comfort  and  some  measure 
of  beauty  might  be  obtainable  that  gave  the  earliest  impetus  to 
that  movement. 

From  a  moral  point  of  view  this  deterministic  conception 
resulted  in  the  absolute  denial  of  all  individual  responsibility.2 
Every  noble  or  ignoble  deed,  every  act,  whether  deserving  of  praise 
or  blame,  of  reward  or  punishment,  reflects  neither  credit  nor  dis- 
credit upon  its  author,  for  the  individual  can  never  be  other  than  he 
actually  is. 

There  was  all  the  more  reason,  then,  why  all  religious  influences, 
especially  that  of  Christianity,  should  be  excluded.  This  contempt 
for  religion  explains  why  Owen  found  so  little  support  in  English 

1  Education  is  given  a  very  prominent  place  in  Owen's  system,  and  once 
we  accept  his  philosophy  we  realise  what  an  important  place  it  was  really 
bound  to  have.  Education  was  to  make  men,  just  as  boots  and  caps  are 
made.  Were  it  not  altogether  foreign  to  our  purpose  it  would  be  interesting 
to  compare  his  educational  ideals  with  those  of  Rousseau  as  outlined  in 
Smile. 

*  "  The  idea  of  responsibility  is  one  of  the  absurdest,  and  has  done  a  great 
deal  of  harm."  (Catechism  of  the  New  Moral  World,  1838.) 


ROBERT  OWEN  239 

society,  which  revolted  against  what  appeared  like  cynical  atheism, 
although  Owen  himself  was  really  a  deist.1 

Economically,  the  doctrine  of  payment  according  to  work  rather 
than  capacity  was  to  result  in  absolute  equality.  For  why  should 
higher  intelligence,  greater  vigour  or  capacity  for  taking  pains 
entitle  a  man  to  a  greater  reward  if  it  is  all  a  question  of  environment  ? 
Hence  Owen's  associations  were  to  be  communal. 

We  need  not  here  detail  the  history  of  his  experiments  in  colonisa- 
tion. It  is  the  usual  story  of  failure  and  disappointed  hopes.  At 
last  Owen  himself  was  driven  to  the  conclusion  that  his  attempt 
to  mould  the  environment  which  was  to  re-create  society  had  proved 
unsuccessful.  He  renounced  all  his  ambitions  for  building  up  a  new 
social  order,  and  contented  himself  with  an  attempt  to  rid  society  as 
at  present  constituted  of  some  of  the  more  potent  evils  that  were 
sapping  its  strength.  And  this  brings  us  to  his  second  essential  idea, 
the  abolition  of  profit. 

2.  THE  ABOLITION  OF  PROFIT 

The  first  necessity,  if  the  environment  was  ever  to  be  changed, 
was  to  get  rid  of  profit.  There  was  the  essential  evil,  the  original  sin. 
Profit  was  the  forbidden  fruit  which  had  compassed  the  downfall  of 
man  and  caused  his  expulsion  from  the  Garden  of  Eden.  Its  very 
definition  conveyed  an  implication  of  injustice,  for  it  was  always 
defined  as  whatever  was  over  and  above  cost  of  production.  Products 
ought  to  be  sold  for  what  they  cost ;  the  net  price  is  the  only  just 
price.  But  profit  is  not  merely  an  injustice,  it  is  a  perpetual  menace. 
Economic  crises  resulting  from  over-production,  or  rather  from  under- 
consumption,2 may  always  be  traced  back  to  an  unhealthy  desire 
for  profit.  The  existence  of  profit  makes  it  impossible  for  the  worker 
to  repurchase  the  product  of  his  toil,  and  consequently  to  consume 
the  equivalent  of  what  he  produced.  Immediately  it  is  completed 
the  product  is  snatched  up  by  a  superior  body  which  makes  it 
inaccessible  either  to  the  maker  or  to  the  men  who  could  furnish  an 
equivalent  amount  of  labour  or  who  could  offer  as  the  price  of 
acquiring  it  a  value  equal  to  that  labour. 

The  problem  is  to  abolish  this  parasitism,  and  the  first  question 

1  On  the  other  hand,  Owen  had  great  influence  with  the  working  classes,  and 
this  he  attributed  to  the  fact  that,  "  freed  from  all  religious  prejudice,  he  was 
able  to  look  upon  men  and  human  nature  in  general  with  infinite  charity,  and 
in  that  light  men  no  longer  seemed  responsible  for  their  actions."  (Quoted  by 
Dolleans.) 

1  Like  most  of  the  economists  and  socialists  of  that  time,  Owen  was  very 
much  impressed  with  the  crisis  of  1815. 


240  THE  ASSOCIATIVE  SOCIALISTS 

that  suggests  itself  is  whether  the  ordinary  operation  of  competition, 
assuming  it  were  altogether  free  and  perfect,  would  be  sufficient  to 
get  rid  of  it.  The  economists  declare  that  it  would,  and  the 
Hedonistic  school  makes  bold  to  affirm  that  under  a  regime  of  perfect 
competition  the  rate  of  profit  would  fall  to  zero.  But  Owen  believed 
nothing  of  the  kind.1  He  regarded  competition  and  profit  as  in- 
separable, and  if  one  was  war  the  other  was  simply  the  spoils  of 
conflict. 

Accordingly  some  form  of  combination  must  be  devised  which 
will  suppress  profit,  together  with  "all  that  gives  rise  to  that  in- 
ordinate desire  for  buying  in  the  cheapest  market  and  selling  in  the 
dearest."  But  the  instrument  of  profit  is  gold  or  money.  Profits 
are  always  realised  in  the  form  of  money.8  Gold  is  an  intermediary 
in  every  act  of  exchange,  and  its  intervention  goes  a  long  way 
towards  explaining  the  anomaly  of  selling  a  commodity  for  more 
than  cost  price.  The  objective,  then,  must  be  money,  and  it  must  be 
replaced  by  labour  notes,  which  will  supply  us  with  a  measure  of 
value  altogether  superior  to  money.  Seeing  that  labour  is  the  cause 
and  substance  of  value,  it  is  only  natural  that  it  should  afford  us  the 
best  means  of  measuring  value.  It  is  quite  obvious  that  ample 
homage  is  paid  to  the  Ricardian  theory  of  value,  but  conclusions 
both  novel  and  unproved  are  drawn  from  it. 

The  producer  who  wishes  to  dispose  of  his  produce  will  be  given 

1  On  the  other  hand,  there  is  this  objection : 

Whenever  profit  forms  a  part  of  cost  of  production  it  is  impossible  to  dis- 
tinguish it  from  interest.  In  that  case  it  is  true  that  even  perfect  competition 
would  not  do  away  with  profit,  since  it  will  only  reduce  the  price  to  the  level  of 
cost  of  production.  In  that  case  profit  cannot  be  said  to  be  either  unjust  or 
parasitic,  for  the  product  is  sold  exactly  for  what  it  cost. 

When  profit  does  not  enter  into  cost  of  production  there  is  no  possibility  of 
confusing  it  with  interest.  It  is  simply  the  difference  between  the  sale  price 
and  the  cost  of  replacing  the  article.  In  this  it  is  certainly  parasitic,  and  would 
disappear  under  a  r&jime  of  perfect  competition,  which  must  to  some  extent 
destroy  the  monopoly  upon  which  such  profit  rests. 

But  the  distinction  between  profit  and  interest  was  not  known  in  Owen's 
time,  and  Owen  would  have  said  that  they  are  both  one,  and  that  if  profit 
occasionally  claims  a  share  in  the  cost  of  production  with  a  view  to  defying 
competition  it  has  no  right  to  any  such  refuge,  for  cost  of  production  should 
consist  of  nothing  but  the  value  of  labour  and  the  wear  and  tear  of  capital. 
Accordingly  it  ought  to  be  got  rid  of  altogether. 

2  "  Metallic  money  is  the  cause  of  a  great  deal  of  crime,  injustice,  and  want, 
and  it  is  one  of  the  contributory  causes  which  tend  to  destroy  character  and  to 
make  life  into  a  pandemonium. 

"  The  secret  of  profit  is  to  buy  cheap  and  to  sell  dear  in  the  name  of  an 
artificial  conception  of  wealth  which  neither  expands  as  wealth  grows  nor 
contracts  as  it  diminishes." 


ROBERT  OWEN  241 

labour  notes  in  proportion  to  the  number  of  hours  which  he  has 
worked.  In  the  same  way  the  consumer  who  wishes  to  buy  that 
product  will  be  called  upon  to  pay  an  equivalent  number  of  labour 
notes,  and  so  profit  will  be  eliminated. 

The  condemnation  of  money  was  not  new,  but  what  was  original 
was  the  discovery  that  labour  notes  could  supply  the  place  of  money, 
a  discovery  which  Owen  considered  "  more  valuable  than  all  the 
mines  of  Mexico  and  Peru."  It  has  truly  been  a  wonderful  mine, 
and  has  been  freely  exploited  by  almost  every  socialist.  But  it 
hardly  squares  with  Owen's  communistic  ideal,  which  aimed  at 
giving  to  each  according  to  his  needs.  The  labour  notes  evidently 
imply  payment  according  to  the  capacity  of  each.  Besides,  what  is 
the  use  of  any  system  of  exchange  that  is  not  to  be  employed  for 
purposes  of  distribution  ?  1 

It  remained  to  be  seen  whether  this  elimination  of  money  could 
actually  be  realised  in  practice.  An  experiment  to  that  effect  was 
tried  in  London  with  the  establishment  of  the  National  Equitable 
Labour  Exchange.  This  was  the  most  interesting  experiment  in 
the  whole  movement,  although  Owen  himself  was  not  very  proud  of 
his  connection  with  it.  It  took  the  form  of  a  co-operative  society 
with  a  central  depot  where  each  member  of  the  society  could  deposit 
the  product  of  his  labour  and  draw  the  price  of  it  in  labour  notes, 
the  price  depending  upon  the  number  of  hours  of  work  the  product 
had  cost,  which  the  member  himself  was  allowed  to  state.  These 
products,  or  goods  as  they  were  now  called,  marked  with  a  figure 
which  indicated  the  number  of  hours  they  had  taken  to  produce, 
were  at  the  disposal  of  any  member  of  the  Exchange  who  wished  to 
buy  them.  All  that  a  member  had  to  do  was  to  pay  the  ticketed 
price  in  labour  notes.  And  so  every  worker  who  had  taken,  say, 
ten  hours  to  make  a  pair  of  stockings  was  certain  of  being  able  to 
buy  any  other  article  which  had  also  cost  ten  hours'  labour.  In  this 
fashion  everyone  got  whatever  his  product  had  cost  him,  and  every 
trace  of  profit  automatically  disappeared.  The  profit-maker,  whether 
industrial  or  commercial  or  merely  an  intermediary,  was  effectively 
removed,  because  producers  and  consumers  were  brought  into  direct 

1  This  contradiction  did  not  escape  Owen.  But  we  must  not  forget  that 
he  regarded  this  merely  as  a  compromise,  and  that  he  looked  forward  to  a 
time  when  the  establishment  of  a  communistic  association  with  a  new  environ- 
ment would  lead  to  a  complete  solution  of  the  problem.  He  began  in  the  New 
Harmony  colony  by  making  pro  rota  payment  for  the  work  done,  but  the  object 
was  to  arrive  gradually  at  a  state  of  complete  equality  where  no  distinction 
was  to  be  made  between  the  service  rendered  or  the  labour  given — with  the 
result  that  the  colony  was  extinct  in  six  months. 


242  THE  ASSOCIATIVE  SOCIALISTS 

contact  with  one  another,  and  so  the  problem  was  apparently 
solved.1 

The  experiment,  which  had  about  the  same  measure  of  success 
as  the  attempts  to  establish  a  communal  colony  in  America,  did  not 
last  very  long.  The  slightest  acquaintance  with  the  laws  of  value 
would  have  convinced  the  reformer  of  the  futility  of  his  attempt. 
But  it  marks  an  important  departure  in  the  history  of  economic 
doctrines  as  being  the  first  of  a  long  line  of  experiments  designed  to 
solve  the  same  problem,  but  with  very  different  methods.  It  is  the  same 
idea  that  inspires  Proudhon's  Bank  and  Solvay's  Comptabilisme  social. 

The  particular  mechanism  wherewith  the  elimination  of  profit 
was  essayed  is  really  of  quite  secondary  importance.  But  the 
essential  idea  which  lay  behind  the  whole  attempt — namely,  the 
abolition  of  profit — is  at  least  partly  realised  in  that  solid  and  useful 
institution  which  is  now  found  all  over  the  world,  and  which  was 

1  The  Labour  Exchange,  which  was  opened  in  September  1832,  at  first  enjoyed 
a  slight  measure  of  success.  There  were  840  members,  and  they  even  went  the 
length  of  establishing  a  few  branches.  Among  the  chief  causes  of  the  failure  of 
the  scheme  the  following  may  be  enumerated  : 

(a)  The  associates,  being  themselves  allowed  to  state  the  value  of  their 
products,  naturally  exaggerated,  and  it  became  necessary  to  relieve  them  of  a 
task  which  depended  entirely  upon  their  honour,  and  to  place  the  valuation  in 
the  hands  of  experts.  But  these  experts,  who  were  not  at  all  versed  in  Owen's 
philosophy,  valued  the  goods  in  money  in  the  ordinary  way,  and  then  expressed 
those  values  in  labour  notes  at  the  rate  of  6d.  for  every  hour's  work.  It  could 
hardly  have  been  done  on  any  other  plan.  But  it  was  none  the  less  true  that 
Owen's  system  was  in  this  way  inverted,  for  instead  of  the  labour  standard 
determining  the  selling  value  of  the  product,  the  money  value  of  the  product 
determined  the  value  of  the  labour. 

(6)  As  soon  as  the  society  began  to  attract  members  who  were  not  quite  as 
conscientious  as  those  who  first  joined  it,  the  Exchange  was  flooded  with  goods 
that  were  really  unsaleable.  But  for  the  notes  received  in  exchange  for  these 
the  authorities  would  be  forced  to  give  goods  which  possessed  a  real  value, 
that  is,  goods  which  had  been  honestly  marked,  and  which  commanded  a  good 
price,  with  the  result  that  in  the  long  run  there  would  be  nothing  left  in  the 
depot  except  worthless  products.  In  short,  the  Exchange  would  be  reduced  to 
buying  goods  which  cost  more  than  they  were  worth,  and  selling  goods  that 
really  cost  less  than  they  were  worth. 

Since  the  notes  were  not  in  any  way  registered,  any  one,  whether  a  member 
of  the  society  or  not,  could  buy  and  sell  them  in  the  ordinary  way  and  make  a 
handsome  profit  out  of  the  transaction.  Three  hundred  London  tradesmen 
did  this  by  offering  to  take  labour  notes  in  payment  for  merchandise.  They 
soon  emptied  the  Exchange,  and  when  they  saw  that  nothing  valuable  was  left 
they  stopped  taking  the  notes,  and  the  trick  was  done. 

M.  Denis  very  aptly  points  out  that  the  Exchange  was  really  of  not  much 
use  to  the  wage-earner,  who  was  not  even  allowed  to  own  what  he  had  produced. 
There  is  some  doubt  after  all  as  to  whether  the  system  would  prove  quite 
successful  in  abolishing  the  wage -earners. 


ROBERT  OWEN  248 

bequeathed  to  us  by  this  experiment  of  Owen's — the  co-operative 
stores.  Their  first  appearance  dates  from  1832,  the  year  of  the 
Bank  of  Exchange  experiment,  but  it  was  not  until  ten  years  later 
that  they  assumed  their  present  form  as  the  outcome  of  the  efforts 
of  the  Rochdale  Pioneers. 

The  co-operative  retail  societies  have  as  their  rule  either  to 
make  no  profits  or  to  restore  any  profit  that  may  accrue  to  their 
members  in  proportion  to  the  amount  of  their  purchases  at  the 
stores.  In  reality  there  is  no  profit,  but  simply  a  cancelling  of 
insurance  against  risks  which  has  been  shared  in  by  all  the  members. 
The  process  of  elimination  is  strictly  in  accordance  with  Owen's 
method  of  putting  producer  and  consumer  in  direct  contact  with 
one  another  with  a  view  to  getting  rid  of  the  middleman.  But  the 
elimination  of  profit  is  accomplished  without  eliminating  money.1 
That  close  relation  which  Owen  and  a  number  of  other  socialists 
believed  to  exist  between  money  and  profit  is  purely  imaginary.  We 
know  as  a  matter  of  fact  that  the  highest  profits  are  to  be  got  under 
the  truck  system,  in  the  African  equatorial  trade,  for  example, 
where  guns  are  exchanged  at  five  times  their  value  for  caoutchouc 
reckoned  at  a  third  of  its  value,  representing  a  profit  of  1500  per 
cent.  The  employment  of  money  has  brought  such  definiteness  into 
the  method  of  valuation  that  the  rate  of  profit  per  unit  on  a  yard 
of  cloth,  say,  has  become  almost  infinitesimal.  Such  exactness  of 
calculation  would  have  been  impossible  under  either  the  truck  or 
the  labour  note  system. 

The  co-operative  association,  with  its  system  of  no  profits,  will 
for  ever  remain  as  Owen's  most  remarkable  work,  and  his  fame  will 
for  ever  be  linked  with  the  growth  of  that  mo.vement.  But  he  was 
hardly  conscious  of  the  important  part  which  he  was  playing  in  the 
inauguration  of  the  new  movement.  It  is  seldom  that  we  meet 
with  the  word  "  co-operation  "  in  his  writings,  although  that  is  not 
a  matter  of  any  great  consequence,  because  the  term  at  that  time 
had  not  the  significance  which  it  has  to-day,  being  then  simply 
synonymous  with  communism.  Not  only  was  Owen  unwilling  to 
assume  any  parental  responsibility  for  the  co-operative  society,  his 
latest  offspring,  but  he  expressly  refused  to  consider  it  as  at  all 
representative  of  his  system.  Shops  of  that  description  seemed  to 
him  little  better  than  philanthropic  institutions,  quite  unworthy  of 

1  This  does  not  imply  that  consumers'  associations,  when  they  are  better 
organised  and  federated,  with  large  central  depots  at  their  command,  will  not 
take  up  this  project  once  again — that  is,  will  not  try  to  dispense  with  money  in 
their  commercial  transactions.  They  will  certainly  keep  an  eye  on  that  problem. 


244  THE  ASSOCIATIVE  SOCIALISTS 

his  great  ideal.1  Before  passing  judgment  upon  him  it  is  only  fair 
to  remember  that  since  those  early  days  the  character  of  the  co- 
operative stores  has  been  completely  changed.  He  lived  to  see  the 
establishment  of  the  Rochdale  society,  with  its  twenty-eight  pioneers, 
six  of  whom  were  ardent  disciples  of  Owen  himself,  and  two  of 
these,  Charles  Howarth  and  William  Cooper,  were  the  very  soul  of 
that  immortal  association.  But  Owen  was  by  this  time  seventy- 
three  years  of  age,  and  he  scarcely  realised  that  a  child  had  been 
born  to  him.  This  somewhat  late  arrival  was  to  perpetuate  his 
name,  and  more  than  any  of  his  other  schemes  was  to  save  it  from 
oblivion. 

Owen  had  founded  no  school,  unless  of  course  we  consider  that 
the  co-operators  are  deserving  of  the  title.  There  were,  however,  a 
few  disciples  who  attempted  to  apply  his  theories.  One  of  these  was 
William  Thompson,  whose  writings,  forgotten  for  many  years,  have 
recently  come  in  for  a  good  deal  of  extravagant  praise.  His  principal 
work,  An  Inquiry  into  the  Principles  of  the  Distribution  of  Wealth,  was 
published  in  1824.  As  compared  with  Owen  he  reveals  a  greater 
depth  of  thought  and  shows  a  more  thorough  acquaintance  with 
economic  science,  and  he  ought  perhaps  to  be  given  premier  place  as 
the  founder  of  socialism.  But,  as  we  have  pointed  out  in  the 
Preface,  we  cannot  readjust  the  judgment  of  history,  and  we  are 
bound  to  accept  the  names  which  tradition  has  made  sacred.  And 
if  a  person's  rank  in  history  is  to  be  measured  by  his  influence  rafher 
than  his  talent,  then  Thompson's  influence  was  nil,  for  at  the  time 
his  work  seems  to  have  passed  almost  unnoticed. 

We  will  only  remark  that  Thompson's  grasp  of  the  idea  that 
labour  does  not  enjoy  all  it  produces  is  much  firmer  than  Owen's. 
This  meant  opening  the  way  for  a  discussion  of  surplus  value  and 
unproductive  labour,  of  which  more  anon.  He  agrees  with  Owen  in 
thinking  that  expropriation  would  not  remedy  the  evil,  and  he  also 
would  rather  build  up  a  new  form  of  enterprise  in  which  the  worker 
would  be  able  to  retain  for  himself  all  the  produce  of  his  labour. 
This  was  precisely  the  co-operative  ideal.8 

1  That  was  Holyoake's  view  (History  of  Co-operation,  vol.  i,  p.  215).  But, 
according  to  a  passage  quoted  by  Dolleans,  Owen  contemplated  making  an 
appeal  to  the  co-operative  societies  to  come  to  the  rescue  of  his  National  Labour 
Exchange. 

1  To  the  workers  he  wrote :  "  Would  you  like  to  enjoy  youraslves  the 
whole  products  of  your  labour  ?  Ycu  have  nothing  more  to  do  than  simply  to 
alter  the  direction  of  your  labour.  Instead  of  working  for  you  know  not  whom, 
work  for  each  other."  (Quoted  by  Foxwell  in  his  introduction  to  Anton  Menger'a 
The  Right  to  the  Whole  Produce  of  Labour.) 


CHARLES  FOURIER  245 

II :   CHARLES  FOURIER 

OWEN'S  practical  influence  has  been  much  greater  than  Fourier's,  for 
most  of  the  important  socialistic  movements  of  the  last  century  can 
easily  be  traced  back  to  Owen.  But  Fourier's  intellectual  work, 
when  taken  as  a  whole,  though  more  Utopian  and  less  restrained 
in  character  than  Owen's,  has  a  considerably  wider  outlook,  and 
combines  the  keenest  appreciation  of  the  evils  of  civilisation  with 
an  almost  uncanny  power  of  divining  the  future.1 

To  some  writers  Fourier  is  simply  a  madman,  and  it  is  difficult 
not  to  acquiesce  in  the  description  when  we  recall  the  many  extrava- 
gances that  disfigure  his  work,  which  even  his  most  faithful  disciples 
can  only  explain  by  giving  them  some  symbolic  meaning  of  which 
we  may  be  certain  Fourier  would  never  have  thought.2  The  term 
"  bourgeois  socialist  "  seems  to  us  to  describe  him  fairly  accurately, 
but  its  employment  lays  us  open  to  the  charge  of  using  a  term  that 
he  himself  would  never  have  recognised.  But  what  are  we  to  make 
of  one  who  speaks  of  Owen's  communistic  scheme  as  being  so  pitiable 
as  to  be  hardly  worth  refuting ;  who  "  shudders  to  think  of  the 
Saint-Simonians  and  of  all  their  monstrosities,  especially  their 
declamations  against  property  and  hereditary  rights  3 — and  all  this 
in  the  nineteenth  century  " ;  who  in  his  scheme  of  distribution 
scarcely  drew  any  distinction  between  labour,  capital,  and  business 
ability,  five-twelfths  of  the  product  being  given  to  labour,  four- 
twelfths  to  capital  (which  is  probably  more  than  it  gets  to-day),  and 
three-twelfths  to  management ;  who  outbid  the  most  brazen-faced 
company  promoter  by  offering  a  dividend  of  30  to  36  per  cent.,  or  for 
those  who  preferred  it  a  fixed  interest  of  8  per,  cent.  ;4  who  held  up 

1  See  the  lecture  on  Lea  Propheties  de  Fourier  in  Gide's  Co-operation. 

1  It  is  hardly  necessary,  however,  to  credit  him  with  a  greater  amount  of 
aocentricity  than  he  actually  possessed,  and  I  seize  this  opportunity  of  refuting 
once  more  a  story  told  by  more  than  one  eminent  economist,  attributing  to  him 
the  statement  that  the  members  of  the  Phalanstere  would  all  be  endowed  with  a 
tail  with  an  eye  at  the  end  of  it.  The  caricaturists  of  the  period — "  Cham,"  for 
example — represent  them  in  that  fashion.  The  legend  doubtless  grew  out  of  the 
following  passage  from  his  works,  which  is  fantastic  enough,  as  everybody  will 
admit.  After  pointing  out  that  the  inhabitants  of  other  planete  have  several 
limbs  which  we  do  not  possess,  he  proceeds  :  "  There  is  one  limb  especially  which 
we  have  not,  and  which  possesses  the  following  very  useful  characteristics.  It 
acts  as  a  support  against  falling,  it  is  a  powerful  means  of  defence,  a  superb 
ornament  of  gigantic  force  and  wonderful  dexterity,  and  gives  a  finish  as  well 
as  lending  support  to  every  bodily  movement."  (Fausse  Industrie,  vol.  ii,  p.  5.) 

1  Nouveau  Monde  industriel,  p.  473. 

1  Letter  dated  January  23,  1831,  quoted  by  Pellarin,  Vie  de  Fourier 
(Paris,  1850). 


246  THE  ASSOCIATIVE  SOCIALISTS 

the  right  of  inheritance  as  one  of  the  chief  attractions  that  would  be 
secured  by  the  Phalanstere  ;  and  who  finally  declared  that  inequality 
of  wealth  and  "  even  poverty  are  of  divine  ordination,  and  conse- 
quently must  for  ever  remain,  since  everything  that  God  has  ordained 
is  just  as  it  ought  to  be  "  ?  1 

To  the  men  of  his  time,  and  to  every  one  who  has  not  read  him, 
which  means  practically  everybody,  Fourier  appears  as  an  ultra- 
socialist  or  communist.  That  opinion  is  founded  not  so  much 
upon  the  extravagance  of  his  view  or  the  hyperbolical  character  of 
his  writing  as  upon  the  popular  conception  of  the  Phalanst^re,  which 
was  the  name  bestowed  upon  the  new  association  he  was  going  to 
create.  Visions  of  a  strange,  bewildering  city  where  the  honour  of 
women  as  well  as  the  ownership  of  goods  would  be  held  as  common 
property  are  conjured  up  at  the  mention  of  that  word.  Our 
exposition  of  his  system  must  obviously  begin  with  an  examination 
of  the  Phalanst^re,  upon  the  understanding  of  which  everything 
turns. 

1.  THE  PHALANSTERE 

As  a  matter  of  fact  nothing  could  be  more  peaceful  than  the 
prospect  which  the  Phalanstere  presents  to  our  view.  Anything 
more  closely  resembling  Owen's  New  Harmony  or  Cabet's  Icaria  or 
Campanella's  Civitas  Solis  or  More's  Utopia  would  be  difficult  to 
imagine.  Externally  it  looks  for  all  the  world  like  a  grand  hotel — a 
Palace  Hotel  on  a  gigantic  scale  with  1500  persons  en  pension.  One 
is  instinctively  reminded  of  those  familiar  structures  which  have 
lately  become  such  a  feature  of  all  summer  and  winter  resorts,  con- 
taining all  manner  of  rooms  and  apartments,  concert  halls  and 
lecture  rooms,  etc.  All  of  this  is  described  by  Fourier  with  the 
minutest  detail.  No  restrictions  would  be  placed  upon  individual 
liberty.  Anyone  so  choosing  could  have  a  suite  of  rooms  for  himself, 
and  enjoy  his  meals  in  the  privacy  of  his  own  room — that  is,  if  he 
preferred  it  to  the  table  d'hote.  Hotel  life  is  generally  open  only 
to  the  few.  The  Phalanstere  would  have  rooms  and  tables  at 
all  prices  to  suit  all  five  classes  of  society,  with  a  free  table  in 
addition. 

A  number  of  people  living  under  the  same  roof  and  eating  at  the 
same  table,  and  adopting  this  as  their  normal  everyday  method  of 
living,  sums  up  the  element  of  communism  which  the  scheme  con- 

1  Nouveau  Monde  indtistriel,  p.  26.  For  further  details  see  (Euvres  choisie* 
de  Fourier,  with  introduction  by  Charles  Gide,  and  Hubert  Bourgin'e  big  volume 
on  Fourier. 


CHARLES  FOURIER  247 

tained.  And  the  question  is  naturally  asked,  Why  should  Fourier 
attach  such  supreme  importance  to  this  mode  of  existence  as  to  make 
it  the  sine  qua  non  of  his  whole  system  and  the  key  to  any  solution 
of  the  problem  ?  The  answer  lies  in  the  conviction,  which  he  fully 
shared  with  Owen,  that  no  solution  is  possible  until  the  environment 
is  changed,  and  so  changed  that  an  entirely  new  type  of  man  will 
result  from  it. 

Economically,  of  course,  life  under  the  same  roof  can  offer  to  the 
consumer  the  maximum  of  comfort  at  a  minimum  of  cost.  Cooking, 
heating,  lighting,  etc.,  would  under  such  conditions  be  cheaper  and 
more  efficient,  and  all  the  worries  and  anxieties  of  individual  house- 
keeping would  be  swept  aside. 

Socially  a  common  life  of  this  kind  would  gradually  teach  different 
persons  to  appreciate  one  another.  Sympathy  would  take  the  place 
of  mutual  antipathy,  which  under  the  present  regime,  as  Fourier 
eloquently  remarks,  shows  an  "  ascending  scale  of  hatred  and  a 
descending  scale  of  contempt."  Besides,  the  multiph'city  of  relations 
and  interests,  and  even  of  intrigues,  which  would  occasionally 
enliven  this  little  world  would  at  any  rate  make  life  more  in- 
teresting. 

On  this  double  series  of  advantages  Fourier  is  quite  inexhaustible. 
He  reckons  up  the  economies  with  the  painstaking  care  of  an  old 
clerk,  and  boasts  the  superiority  of  the  table  (Thdte  over  the  family 
meal  with  the  enthusiasm  of  an  old  bachelor.  The  social  and  moral 
advantages  seem  somewhat  more  doubtful.  It  is  not  very  obvious 
that  contact  with  the  rich  would  make  the  poor  more  polished  or 
amicable,  nor  is  it  very  clear  that  either  would  be  much  happier  for 
it.  Fourier's  Utopia  is  already  in  operation  in  the  United  States, 
where,  owing  to  the  increase  in  the  cost  of  living,  the  economic 
advantages  of  a  communal  life  are  more  fully  taken  advantage  of. 
Not  only  are  there  a  great  number  of  bachelors  living  at  the  clubs, 
but  young  couples  have  recently  made  a  practice  of  taking  up 
their  abode  at  the  hotels.  They  are  already  on  the  way  to  the 
Phalanst£re. 

This  shows  that  Fourier  was  considerably  in  advance  of  his  time, 
and  those  who  hold  that  doctrines,  after  all,  are  always  suggested 
by  facts  would  find  it  difficult  to  discover  anything  pointing  towards 
such  communal  experiments  in  the  earlier  part  of  the  nineteenth 
century. 

His  solution  of  the  servant  problem,  which  is  becoming  more 
difficult  every  day,  is  one  that  is  likely  to  be  adopted  in  the 
near  future.  His  suggestion  was  the  substitution  of  collective  for 


248  THE  ASSOCIATIVE  SOCIALISTS 

individual  services  as  being  more  compatible  with  human  dignity 
and  independence,  and  the  development  of  industrial  rather  than 
domestic  production.  This  has  already  taken  place  in  the  case  of 
bread-making  and  laundry  work,  and  there  are  signs  of  its  extension 
to  house-sweeping  (by  means  of  the  vacuum  cleaner),  carpet- 
cleaning,  etc.  A  further  extension  to  the  art  of  cooking  may  also  be 
expected.1 

2.  INTEGRAL  CO-OPERATION 

Careful  scrutiny  of  the  internal  arrangements  of  the  PhalanstSre 
shows  it  to  be  something  other  than  an  ordinary  hotel  after  all.  It 
may  perhaps  be  regarded  as  a  kind  of  co-operative  hotel,  belonging 
to  an  association  and  accommodating  members  of  that  association 
only.  It  is  much  more  thoroughgoing  than  the  ordinary  co-opera- 
tive society,  which  is  just  content  to  buy  commodities  as  an  associa- 
tion without  making  any  real  attempt  to  practise  communism, 
except  in  those  rare  cases  where  a  co-operative  restaurant  is  set  up 
alongside  of  a  co-operative  warehouse. 

The  "  Phalange,"  not  content  to  remain  a  mere  consumers' 
association,  was  to  attempt  production  as  well.  Around  the  hotel 
was  to  be  an  area  of  400  acres,  with  farm  buildings  and  industrial 
establishments  that  were  to  supply  the  needs  of  the  inmates.  The 
Phalange  was  to  be  a  small  self-sufficing  world,  a  microcosm 
producing  everything  it  consumed,  and  consuming — as  far  as  it 
could — all  it  produced.  Occasionally,  no  doubt,  there  would  be 
occasional  surpluses  or  some  needs  would  remain  unsatisfied,  and 
then  recourse  would  be  had  to  exchange  with  other  Phalanges. 
Every  Phalange  was  to  be  established  as  a  kind  of  joint-stock  com- 
pany. Private  property  was  not  to  be  extinguished  altogether,  but 
to  be  transformed  into  the  holding  of  stock — a  transformation  of  a 
capitalistic  rather  than  of  a  socialistic  nature.  M.  de  Molinari  states 
that  the  future  will  witness  the  almost  universal  application  of  the 
joint-stock  principle,  and  he  for  one  would  welcome  its  extension. 
Fourier  has  forestalled  his  prophecy  by  three-quarters  of  a  century, 
with  an  insight  that  is  truly  remarkable  for  the  time  in  which  he 
wrote,  for  joint-stock  undertakings  were  then  exceedingly  rare.  He 
enumerates  the  many  advantages  which  would  result  from  such  a 

1  It  is  necessary  to  point  out  that  Fourier's  suggestions  for  a  solution  of  the 
domestic  servant  problem  are  really  not  quite  so  definite  as  we  have  given  the 
reader  to  understand  in  the  text.  They  are  mixed  up  with  a  number  of  other 
ideas  of  a  more  or  less  fantastic  description,'  but  very  suggestive  never- 
theless. This  is  especially  true  of  the  suggestion  to  transform  domestic  servic* 
bj  making  it  mutually  gratuitous — an  idea  that  is  worth  thinking  about. 


CHARLES  FOURIER  249 

transformation  in  the  nature  of  property,  and  he  roundly  declares 
that  "  a  share  in  such  concerns  is  really  more  valuable  than  any 
amount  of  land  or  money." 

How  were  the  extravagant  dividends  which  he  promised  when 
propounding  his  scheme  to  be  paid  out  ?  The  usual  method  in 
financial  and  commercial  transactions  is  to  distribute  them  according 
to  the  holding  of  each  individual.  But  such  was  not  to  be  his  plan. 
Capital  was  to  have  a  third  of  the  profits,  labour  five-twelfths,  and 
ability  three- twelfths.  **  Ability,"  which  signifies  the  work  of 
management,  was  to  devolve  upon  those  individuals  who  were  chosen 
by  the  society  and  were  considered  best  fitted  for  the  work.  Fourier 
never  realised  that  there  was  a  possibility  of  the  wrong  man  being 
chosen.  He  had  no  experience  of  universal  suffrage,  and  he  believed 
that  within  such  a  tiny  group  the  election  would  be  perfectly  bona- 
fide. 

Associations  known  as  Phalanges  have  actually  been  established 
in  Paris,  and  to  some  extent  at  any  rate  they  have  realised  the  ideal 
as  outlined  by  Fourier.  The  profits  are  divided  in  almost  strict 
accordance  with  Fourier's  formula,1  and  in  order  to  emphasise  their 
descent  from  him  the  members  have  caused  a  statue  to  be  raised  to 
his  memory  in  their  quarter  of  the  town — the  Boulevard  de  Clichy. 

Not  content  with  giving  us  an  outline  of  a  co-operative  produc- 
tive society,  Fourier  has  also  left  us  an  admirably  concise  statement 
of  the  problem  that  faces  modern  society.  "  The  first  problem  for 
the  economist  to  solve,"  says  he,  "  is  to  discover  some  way  of  trans- 
forming the  wage-earner  into  a  co-operative  owner."  8 

The  necessity  for  such  transformation  consists  in  the  fact  that 
this  is  the  only  way  of  making  labour  at  once  attractive  and  pro- 
ductive, for  "  the  sense  of  property  is  still  the  strongest  lever  in 
civilised  society."  8  "  The  poor  individual  in  Harmony  who  only 
possesses  a  portion  of  a  share,  say  a  twentieth,  is  a  part  proprietor 
of  the  whole  concern.  He  can  speak  of  our  land,  our  palaces  and 
castles,  our  forests  and  factories,  for  all  of  them  belong  partly  to 
him."  *  "  Hence  the  role  of  capitalist  and  proprietor  are  synony- 
mous in  Harmony."  6 

1  We  were  thinking  especially  of  associations  like  that  of  the  painters  under  the 
leadership  of  M.  Buisson,  where  distribution  is  as  follows :  labour,  50  per  cent., 
capital  27  per  cent.,  administration  12  per  cent. 

1  Association  domestique,  vol.  i,  p.  466. 

1  Ibid.,  p.  466.  Note  that  Fourier  says  that  this  only  applies  to  civilised 
societies.  For  those  who  live  in  the  future  Harmony  city  there  will  be  othfr 
and  more  powerful  motives. 

4  Unitt  univertelk,  vol.  iii,  p.  517.  •  Ibid.,  p.  467. 

K.U.  X 


250  THE  ASSOCIATIVE  SOCIALISTS 

The  worker  will  draw  his  share  of  the  profits  not  merely  as  a 
worker,  but  also  as  a  capitalist  who  is  a  shareholder  in  the  concern, 
and  as  a  member  of  the  directorate,  in  which  every  shareholder  has 
a  voice.  The  administration  of  the  business  will  form  a  part  of  his 
responsibilities.  It  is  just  what  we  are  accustomed  to  call  co- 
partnership. He  will,  moreover,  participate  in  the  privileges  and 
management  of  the  Phalange  as  a  member  of  a  consumers'  association. 

All  this  seems  very  complicated,  but  it  was  a  part  of  Fourier's 
policy  to  transmute  the  divergent  interests  of  capitalists,  workers, 
and  consumers  by  giving  to  each  individual  a  share  in  these  con- 
flicting interests.1  Under  existing  conditions  they  are  in  conflict 
with  one  another  simply  because  they  are  focused  in  different 
individuals.  Were  they  to  be  united  in  the  same  person  the  conflict 
would  cease,  or  at  any  rate  the  battleground  would  be  shifted  to  the 
conscience  of  each  individual,  where  reconciliation  would  not  be 
quite  such  a  difficult  matter. 

A  programme  which  aims,  not  at  the  abolition  of  property,  but 
at  the  extinction  of  the  wage- earner  by  giving  him  the  right  of 
holding  property  on  the  joint-stock  principle,  which  looks  to  succeed, 
not  by  advocating  class  war,  but  by  fostering  co-operation  of  capital 
with  labour  and  managing  ability,  and  attempts  to  reconcile  the 
conflicting  interests  of  capitalist  and  worker,  of  producer  and 
consumer,  debtor  and  creditor,  by  welding  those  interests  together 
in  one  and  the  same  person,  is  by  no  means  commonplace.  Such 
was  the  ideal  of  the  French  working  classes  until  Marxian  collectivism 

1  The  system  of  integral  association  proposed  by  Fourier,  including  both 
co-operative  production  and  co-operative  distribution,  will  be  better  understood 
if  we  look  at  the  facts  of  the  present  situation. 

On  the  one  hand  we  have  co-operative  associations  of  producers  who  are  not 
particularly  anxious  that  the<r  products  should  be  distributed  among  themselves ; 
they  simply  produce  the  goods  with  a  view  to  selling  them  and  making  a  profit 
out  of  the  transaction.  On  the  other  hand,  the  distributing  societies  simply  aim 
at  giving  their  members  certain  advantages,  such  as  cheaper  goods,  but  they 
make  no  attempt  to  produce  the  goods  which  they  need. 

In  countries  where  co-operative  societies  are  properly  organised,  as  they 
are  in  England,  for  example,  many  of  these  societies  have  undertaken  to  produce 
at  least  a  part  of  what  they  consume,  and  some  of  them  have  even  acquired 
small  estates  for  the  purpose  ;  but  only  a  small  proportion  of  the  employees  are 
members  of  the  societies,  with  the  result  that  their  position  is  not  very  different 
from  that  of  other  working  men.  One  understands  the  difficulty  of  grouping 
people  in  this  way.  But  if  the  associations  are  to  live  it  is  absolutely  necessary 
that  they  should  produce  what  they  require  under  conditions  that  are  more 
favourable  than  those  of  ordinary  producers ;  in  a  word,  that  they  should  be 
able  to  create  a  kind  of  new  economic  environment. 

Even  in  the  colonies  one  does  not  find  many  instances  of  vigorous  associations 
of  this  kind. 


CHARLES  FOURIER  251 

took  its  place,  and  it  is  quite  possible  that  its  deposition  may  be 
only  temporary  after  all.  The  programme  which  the  Radical 
Socialists  swear  allegiance  to,  and  which  they  set  against  the  purely 
socialistic  programme,  is  the  maintenance  and  extension  of  private 
property  and  the  abolition  of  the  wage- earner.  By  taking  this 
attitude  they  are  unconsciously  following  in  the  wake  of  Fourier.1 

8.  BACK  TO  THE  LAND 

The  title  at  the  head  of  this  section  is  to-day  adopted  as  a  motto 
by  several  social  schools.  It  also  figured  in  Fourier's  programme 
long  ago.  Fourier,  however,  employed  the  phrase  in  a  double  sense. 

In  the  first  place,  he  thought  that  there  must  be  a  dispersion  of 
the  big  cities  and  a  spreading  out  of  their  inhabitants  in  Phalansteres, 
which  would  simply  mean  moderate-sized  villages  with  a  popula- 
tion of  1600  people,  or  400  families.  Great  care  was  to  be  exercised 
in  choosing  a  suitable  site.  Wherever  possible  the  village  was  to 
be  placed  on  the  bank  of  a  beautiful  river,  with  hills  surrounding 
it,  the  slopes  of  which  would  yield  to  cultivation,  the  whole  area 
being  flanked  by  a  deep  forest.  It  was  not,  as  some  one  has  remarked, 
intended  as  an  Arcadia  for  better-class  clerks.2  It  was  simply  an 
anticipation  of  the  garden  cities  which  disciples  of  Ruskin  and  Morris 
are  building  all  over  England.  These  are  designed,  as  we  know,  not 
merely  with  a  view  to  promoting  health  and  an  appreciation  of  beauty, 
but  also  to  encouraging  the  amenities  of  life  and  to  solving  the 
question  of  housing  by  counteracting  the  high  rental  of  urban  land. 

In  the  second  place,  industrial  work  of  every  description,  factory 
and  machine  production  of  every  kind,  were  to  be  reduced  to  the 
indispensable  minimum — a  condition  that  was  absolutely  necessary 
if  the  first  reform  was  ever  to  become  practicable.  Contrary  to 
what  might  have  been  expected,  Fourier  felt  no  antipathy  towards 
capitalism,  but  entertained  the  greatest  contempt  for  industrialism, 
which  is  hardly  the  same  thing.8  A  return  to  the  land,  if  it  was  to 
mean  anything  at  all,  was  to  mean  more  agriculture.  But  care 
must  be  taken  not  to  interpret  it  in  the  old  sense  of  tillage  or  the 
cultivation  of  cereals.  It  was  in  no-  measured  terms  that  he  spoke 

1  Co-partnership  as  outlined  by  M.  Briand  is  to-day  an  item  in  the  programme 
of  the  Radical  Democratic  party.  See  Lea  Actions  du  Travail,  by  M.  Antonelli. 

*  M.  Faguet,  Revue  dee  Deux  Mondes,  August  1,  1896. 

*  "  Industrialism  is  the  latest  scientific  illusion."    (Quatrc  Mouvementt,  p.  28.) 
We  must  also  draw  attention  to  his  suggestion  for  co-operative  banks,  where 
agriculturists  could  bring  their  harvest  and  obtain  money  in  exchange  for  it — a 
rough  model  of  the  agricultural  credit  banks.     But  he  only  regarded  this  OB  a 
step  towards  the  Phalanstere 


252  THE  ASSOCIATIVE  SOCIALISTS 

of  the  cultivation  of  corn  and  the  production  of  bread,  which  has 
caused  mankind  to  bend  under  the  cruellest  yoke  and  for  the  coarsest 
nourishment  that  history  knows.  The  only  attractive  forms  of 
cultivation,  in  his  opinion,  were  horticulture  and  arboriculture,  apple- 
growing,  etc.,  joined,  perhaps,  with  poultry-keeping  and  such  occupa- 
tions as  generally  fall  to  the  lot  of  the  small-holder.1  The  inhabitant 
of  the  Phalanstere  would  be  employed  almost  exclusively  in  looking 
after  his  garden,  just  as  Adam  was  before  the  Fall  and  Candide 
after  his  misfortunes. 

4.  ATTRACTIVE  LABOUE 

The  attractiveness  of  labour  was  made  the  pivot  of  Fourier's 
system.  Wherever  we  like  to  look,  whether  in  the  direction  of 
so-called  civilised  societies  or  towards  barbarian  or  servile  com- 
munities, labour  is  everywhere  regarded  as  a  curse.  There  is  no 
reason  why  it  should  be,  and  in  the  society  of  the  future  it  certainly 
will  not  be,  for  men  will  then  labour  not  because  they  are  constrained 
to  either  by  force  or  by  the  pressure  of  need  or  the  allurement  of 
self-interest.  Fourier's  ideal  was  a  social  State  in  which  men  would 
no  longer  be  forced  to  work,  whether  from  the  necessity  of  earning 
their  daily  bread  or  from  a  desire  for  gain  or  from  a  sense  of  social 
or  religious  duty.  His  ambition  was  to  see  men  work  for  the  mere 
Idve  of  work,  hastening  to  their  task  as  they  do  to  a  gala.  Why 
should  not  labour  become  play,  and  why  should  not  the  same  degree 
of  enthusiasm  be  shown  for  work  as  is  shown  by  youth  in  the 
pursuit  of  sport  ?  2 

Fourier  thinks  this  would  be  possible  if  everyone  were  certain 
that  he  would  get  a  minimum  of  subsistence  by  his  work.  Labour 
would  lose  all  its  coercive  features,  and  would  be  regarded  simply 
as  an  opportunity  for  exercising  certain  faculties,  provided  sufficient 

1  The  kinds  of  labour  which  Fourier  selects  as  examples  are  always  connected 
with  fruit-growing — cherry  orchards,  pear  orchards,  etc.  Fruit  and  flowers 
have  a  very  important  place  in  his  writings.  He  seems  to  have  anticipated  the 
fruit-growing  rancher  of  California. 

Without  stopping  to  examine  some  of  the  more  solid  reasons — which  unfor- 
tunately are  buried  beneath  a  great  deal  of  rubbish — why  fruit-growing  should 
take  the  place  of  agriculture,  we  must  just  recall  the  curious  fact  that  he  was 
always  emphasising  the  superiority  of  sugar  and  preserves  over  bread,  and 
pointed  to  the  "  divine  instinct "  by  which  children  are  enabled  to  discover 
this.  The  suggestion  was  ridiculed  at  the  time,  but  is  to-day  confirmed  by 
some  of  the  most  eminent  doctors  and  teachers  of  hygiene. 

1  It  is  interesting  to  contrast  this  view  with  Bucher's,  who  thinks  that  the 
evolution  of  industry  simply  increases  its  irksomeness.  A  conception  of  regres- 
sive or  spiral  evolution  might  reconcile  the  two  views. 


CHARLES  FOURIER  253 

liberty  were  given  everyone  to  choose  that  kind  of  work  which 
suited  him  best,  and  provided  also  the  labour  were  sufficiently 
diversified  in  character  to  stimulate  imagination  and  were  carried 
on  in  an  atmosphere  of  joy  and  beauty.  The  sole  object  of  the 
Phalanstere,  as  we  have  already  seen,  was  to  make  labour  more 
attractive  by  creating  a  new  kind  of  social  life  in  which  production 
as  well  as  distribution  would  be  on  a  co-operative  basis  and  horti- 
culture would  take  the  place  of  agriculture.  But  Fourier  was  not 
content  to  stop  at  that,  and  he  proceeds  to  show  the  importance  of 
combining  different  kinds  of  employment.  Some  of  his  suggestions 
are  very  ingenious ;  others,  on  the  other  hand,  are  equally  puerile. 
The  most  notable  of  these  is  his  proposal  to  bring  individuals  together 
into  what  he  calls  groups  and  series.  A  person  would  be  allowed  to 
join  these  groups  according  to  his  own  individual  preferences,  and 
as  it  would  not  involve  his  spending  his  whole  life  in  any  one  of  them, 
he  would  be  free  to  **  flit  "  from  one  to  the  other. 

But  it  is  about  time  we  took  leave  of  our  guide.  We  cannot 
pretend  to  follow  the  twists  and  turns  of  his  labyrinthine  psychology, 
with  its  dozen  passions,  of  which  the  three  fundamental  ones  are 
the  desire  for  change,  for  order,  and  for  secrecy ;  nor  can  we  bring 
ourselves  to  accept  his  theodicy,  nor  his  views  on  climatic  and  cosmo- 
genic  evolution,  which  was  some  day  to  result  in  sweetening  the  waters 
of  the  ocean,  in  melting  the  polar  glaciers,  in  giving  birth  to  new 
animals,  and  in  putting  us  in  communication  with  other  planets. 
Yet  even  this  muddy  torrent  is  not  without  some  grain  of  gold  in  it. 

Take  the  question  of  education,  for  example,  which  holds  a  very 
prominent  place  in  his  writings.  Old  bachelor  that  he  was,  he  never 
cared  very  much  for  children,  but  he  nevertheless  foreshadowed  the  de- 
velopment of  modern  education  on  several  important  points.  Froebel, 
who  conceived  the  idea  of  the  kindergarten  (1837),  was  among  his 
disciples.1 

His  teaching  on  the  sex  question  bears  all  the  marks  of  lax 
morality,  and  indicates  the  fallacy  of  thinking  that  untrained 
passions  and  instincts  can  be  morally  justified.2  His  extreme  views 

1  Let  us  not  forget  his  Petitea  Hordes,  which  consisted  of  groups  of  boys  who 
undertook  the  sweeping  of  public  paths,  the  surveillance  of  public  gardens,  and 
the  protection  of  animals.  The  idea  was  very  much  ridiculed  at  the  time,  but 
a  number  of  similar  organisations,  each  with  its  badge  and  banner,  were  recently 
instituted  by  Colonel  Waring  in  the  city  of  New  York 

1  "  My  theory  is  that  every  passion  given  by  nature  should  be  allowed  the 
fullest  scope.  That  is  the  key  to  my  whole  system.  Society  requires  the  full 
exercise  of  all  the  faculties  given  us  by  God." 


254  THE  ASSOCIATIVE  SOCIALISTS 

on  this  question,  which  even  go  beyond  the  advocacy  of  free  union, 
have  contributed  a  great  deal  to  the  downfall  of  Fourierism.  Paul 
Janet  remarks  somewhere  that  the  socialists  have  not  been  very 
happy  in  their  treatment  of  the  woman  question,  and  we  have  already 
shown  how  this  weakness  led  to  the  downfall  of  Saint-Simonism. 
But  even  on  this  subject  Fourier  has  penned  a  few  pithy  sentences. 
"  As  a  general  rule,"  he  says,  "  it  may  be  said  that  true  social 
progress  is  always  accompanied  by  the  fuller  emancipation  of 
woman,  and  there  is  no  more  certain  evidence  of  decadence  than  the 
gradual  servility  of  women.  Other  events  undoubtedly  influence 
political  movements,  but  there  is  no  other  cause  that  begets  social 
progress  or  social  decline  with  the  same  rapidity  as  a  change  in  the 
status  of  women."  1  Unfortunately  his  feminism  was  not  so  much 
inspired  by  respect  for  the  dignity  of  woman  as  by  his  hatred  of 
family  life,  and  the  liberty  which  he  thought  to  be  the  true  test  of 
progress  was  generally  nothing  better  than  free  love. 

The  anti-militarists  have  good  claim  to  regard  him  as  a  fore- 
runner. Speaking  of  present-day  society,  he  said  that  "  it  consists 
of  a  minority  of  armed  slaves  who  hold  dominion  over  a  majority 
of  disarmed." 

It  was  not  Fourier's  intention  to  introduce  men  into  the  world 
of  Harmony  at  one  stroke.  He  thought  that  as  an  indispensable 
preliminary  they  should  go  through  a  stage  of  transition  which  he 
calls  Garantisme,  where  each  one  would  be  given  a  minimum  of 
subsistence,  security,  and  comfort — in  short,  everything  that  is 
considered  necessary  by  the  advocates  of  working-class  reform. 

Fourierism  never  enjoyed  the  prestige  and  never  exercised  the 
influence  which  Saint-Simonism  did,  but  its  action,  though  less 
startling,  and  confined  as  it  was  to  a  narrower  sphere,  has  not  been 
less  durable.  Nothing  has  been  heard  of  Saint-Simonism  these  last 
fifty  years,  but  there  is  still  a  Phalanst^re  school.  It  is  not  very 
numerous,  perhaps,  if  we  are  only  to  reckon  those  who  formally 
adhere  to  the  doctrine,  but  if  we  take  into  consideration  the  co- 
operative movement,  as  we  ought  at  least  to  some  extent,  it  is  seen 
to  be  very  powerful  still.  For  a  long  time  Fourier's  ideas  were 
scouted  by  everybody,  but  during  the  last  fifteen  years  much  more 
sympathetic  attention  has  been  given  them.2 

Among  his  disciples  there  are  at  any  rate  two    who  deserve 

1  Quatre  Mouvemente,  p.  194. 

*  See,  for  example,  such  works  as  Zola's  Travail,  and  Barre's  L'Ennemi  dea 
Lois  ;  and  as  an  example  of  the  general  change  in  the  tone  of  the  economists  ws 
may  refer  to  Paul  Leroy-Beaulieu's  latest  writings,  in  which  he  speaks  of  Fourier 
as  a  "  genial  thinker/1 


Louis  BLANC  255 

special  mention.  Victor  Considerant,  one  of  the  strongest  advo- 
cates of  Fourierism,  has  left  us  the  best  exposition  of  the 
doctrine  that  we  have,  in  his  book  Doctrine  saddle  (1834—4-4).  Like 
Owen,  he  experimented  in  American  colonisation,1  and  gained  a 
measure  of  notoriety  in  the  Revolution  of  1848  by  insisting  upon 
the  right  to  work  as  a  necessary  compensation  for  the  loss  of 
property. 

Andre  Godin  left  a  monument  more  permanent  than  books,  in 
the  famous  Familistere  which  was  founded  by  him.  It  consists  of 
an  establishment  for  the  manufacture  of  heating  apparatus  at 
Guise,  run  entirely  on  co-partnership  lines,  the  profits  being  dis- 
tributed in  accordance  with  the  rules  of  the  master.*  It  is  not  a 
new  co-operative  society  of  the  humdrum  kind,  however.  Close  to 
the  works,  right  in  the  middle  of  a  beautiful  park,  are  one  or  two 
huge  blocks  which  contain  the  "  flats  "  where  the  co-partners  live, 
as  well  as  schools,  creches,  a  theatre,  and  a  co-operative  stores.  But 
despite  its  fame,  and  notwithstanding  the  fact  that  it  has  become  a 
kind  of  rendezvous  for  co-operators  all  the  world  over,  there  is 
nothing  very  attractive  about  it,  and  if  one  wants  to  get  a  good  idea 
of  what  a  real  Phalanstere  is  like  it  is  better  to  visit  either  Bournville 
or  Port  Sunlight,  or  Agneta  Park  in  Holland. 


Ill :   LOUIS  BLANC 

IT  is  not  the  most  original  work  that  always  attracts  most  attention. 
Stuart  Mill,  writing  of  Saint-Simonism  and  Fourierism,  claims  that 
"  they  may  justly  be  counted  among  the  most  remarkable  produc- 
tions of  the  past  and  present  age."  To  apply  such  terms  to  the 
writings  of  Louis  Blanc  would  be  entirely  out  of  place.  His  pre- 
decessors' works,  despite  a  certain  mediocrity,  are  redeemed  by 
occasional  remarks  of  great  penetratidn ;  but  there  is  none  of  that 
in  Louis  Blanc's.  Moreover,  his  treatment  is  very  slight,  the  whole 
exposition  occupying  about  as  much  space  as  an  ordinary  review 

1  It  is  no  part  of  our  task  to  relate  the  story  of  the  several  colonies  founded 
either  by  disciples  of  Fourier  or  of  Owen,  Experiments  of  this  kind  were  fairly 
general  in  the  United  States  between  1841  and  1844,  when  no  less  than  forty 
colonies  were  founded.  Brook  Farm,  which  is  the  best  known  of  these,  included 
among  its  members  some  of  the  most  eminent  Americans — Charming  and  Haw- 
thorne, for  example — but  none  of  the  settlements  lasted  very  long. 

Similar  attempts  have  been  made  in  France  at  a  still  more  recent  period.  The 
one  at  Cond6-8ur-Vesgres,  near  Rambouillet,  where  a  few  faithful  disciples  of 
Fourier  have  come  together,  is  still  flourishing. 

1  Founded  in  1859,  it  only  became  a  co-partnership  in  1888,  the  year  of 
Godin's  death. 


256  THE  ASSOCIATIVE  SOCIALISTS 

article.1  And  there  is  no  evidence  of  exceptional  originality,  for  the 
sources  of  its  inspiration  must  be  sought  elsewhere — in  the  writings 
of  Saint-Simon,  of  Fourier,  of  Sismondi,  and  of  Buonarotti,  one  of 
the  survivors  of  the  Babeuf  conspiracy,8  and  in  the  democratic 
doctrines  of  1793.  In  short,  Blanc  was  content  to  give  a  convenient 
exposition  of  such  socialistic  ideas  as  the  public  had  become 
accustomed  to  since  the  Restoration. 

Nevertheless,  no  sooner  was  the  Organisation  du  Travail  published 
in  1841  than  it  was  read  and  discussed  by  almost  everybody.  Several 
editions  followed  one  another  in  rapid  succession.  The  title,  which 
is  borrowed  from  the  Saint-Simonians,  supplied  one  of  those  popular 
formulae  which  conveniently  summed  up  the  grievances  of  the 
working  classes  in  1848,  and  during  the  February  Revolution  Louis 
Blanc  came  to  be  regarded  as  the  best  qualified  exponent  of  the 
views  of  the  proletariat.  Even  for  a  long  time  after  1848  the  work 
was  considered  to  be  the  most  characteristic  specimen  of  French 
socialistic  writing. 

Its  success  was  in  a  measure  due  to  the  circumstances  of  the 
period.  The  brevity  of  the  book  and  the  directness  of  the  exposition 
made  the  discussion  of  the  theme  a  comparatively  easy  matter. 
The  personal  notoriety  of  the  author  also  had  a  great  deal  to  do  with 
the  interest  which  his  work  aroused.  During  the  short  career  of  the 
July  monarchy,  Blanc,  both  in  the  press  and  on  the  platform,  had 
found  himself  one  of  the  most  valiant  supporters  of  the  advanced 
democratic  wing.  His  Histoire  de  Dix  Ans  gave  him  some  standing 
as  a  historian.  Later  on  the  role  which  he  played  as  a  member  of 
the  Provisional  Government  of  1848,  and  afterwards  at  the  inaugura- 
tion of  the  Third  Republic,  contributed  to  his  fame  as  a  public  man. 
And,  last  of  all,  his  unfortunate  experience  in  connection  with  the 
failure  of  the  national  workshops,  for  which  he  was  unjustly  blamed, 
added  to  the  interest  which  the  public  took  in  him. 

All  this,  however,  would  not  justify  his  inclusion  in  our  history 
were  it  not  for  other  reasons  which  give  to  the  Organisation  du 
Travail  something  more  than  a  mere  passing  interest. 

In  no  other  work  is  the  opposition  between  competition  and 
association  so  trenchantly  stated.  Every  economic  evil,  if  we  are 
to  believe  Blanc,  is  the  outcome  of  competition.  Competition  affords 
an  explanation  of  poverty  and  of  moral  degradation,  of  the  growth  of 

1  As  a  matter  of  fact  it  first  appeared  as  an  article  in  the  Revue  duProgree  in  1 839. 

1  Buonarotti  was  the  author  of  La  Conspiration  pour  VEgaliti,  dite  de  Babeuf, 
published  in  1828.  Little  notice  was  taken  of  the  volume  by  the  public,  but  it 
was  much  discussed  in  democratic  circles. 


Louis  BLANC  257 

crime  and  the  prevalence  of  prostitution,  of  industrial  crises  and 
international  feuds.  "  In  the  first  place,"  writes  Blanc,  "  we  shall 
show  how  competition  means  extermination  for  the  proletariat,  and 
in  the  second  place  how  it  spells  poverty  and  ruin  for  the  bourgeoisie." 1 
The  proof  spreads  itself  out  over  the  whole  work,  and  is  based  upon 
varied  examples  gleaned  from  newspapers  and  official  inquiries, 
from  economic  treatises  and  Government  statistics,  as  well  as  from 
personal  observations  carried  on  by  Blanc  himself.  No  effort  is 
spared  to  make  the  most  disagreeable  facts  contribute  of  their 
testimony.  Everything  is  arranged  with  a  view  to  one  aim — the 
condemnation  of  competition.  Only  one  conclusion  seems  possible  : 
"  If  you  want  to  get  rid  of  the  terrible  effects  of  competition  you 
must  remove  it  root  and  branch  and  begin  to  build  anew,  with 
association  as  the  foundation  of  your  social  life." 

Louis  Blanc  thus  belonged  to  that  group  of  socialists  who  thought 
that  voluntary  associations  would  satisfy  all  the  needs  of  society. 
But  he  thinks  of  association  in  a  somewhat  different  fashion  from 
his  predecessors.  He  dreams  neither  of  New  Harmony  nor  of  a 
Phalanstere.  Neither  does  he  conceive  of  the  economic  world  of  the 
future  as  a  series  of  groups,  each  of  which  forms  a  complete  society 
in  itself.  Fourier's  integral  co-operation,  where  the  Phalanstere  was 
to  supply  all  the  needs  of  its  members,  is  ignored  altogether.  His 
proposal  is  a  social  workshop,  which  simply  means  a  co-operative 
producers'  society.  The  social  workshop  was  intended  simply  to 
combine  members  of  the  same  trade,  and  is  distinguished  from  the 
ordinary  workshop  by  being  more  democratic  and  equalitarian. 
Unlike  Fourierism,  it  does  not  contain  within  itself  all  aspects  of 
economic  life.  By  no  means  self-contained,  it  merely  undertakes 
the  production  of  some  economic  good,  which  other  folk  are  expected 
to  buy  in  the  ordinary  way.  Louis  Blanc's  is  simply  the  commonest 
type  of  co-operative  society.2  The  schemes  of  both  Owen  and 
Fourier  were  much  more  ambitious,  and  attempted  to  apply  the 
principle  of  co-operation  to  consumption  as  well  as  to  production. 

Nor  was  the  idea  altogether  a  new  one.     A  Saint-Simonian  of  the 

1  Organisation  du  Travail,  5th  ed.  (1848).  p.  77. 

1  We  refer  to  it  as  the  commonest  type  because  in  the  previous  section 
we  have  shown  that  other  co-operative  societies  exist,  such  as  Le  Travail,  for 
example,  which  claims  to  be  modelled  upon  Fourier's  scheme,  especially  in  the 
matter  of  borrowed  capital.  But  the  usual  type  is  affiliated  to  the  Chambre 
consultative  des  Associations  de  Production.  Article  II  of  its  regulations 
reads  as  follows  :  "  No  one  will  be  allowed  to  become  a  subscriber  who  is  not  a 
worker  in  some  branch  of  production  or  other."  See  the  volume  published  by 
the  Office  du  Travail  in  1898,  Lei  Aeaociations  Ouvrieret  de  Production. 
B.D.  r* 


258  THE  ASSOCIATIVE  SOCIALISTS 

name  of  Buchez  had  already  in  1831 l  made  a  similar  proposal,  but 
it  met  with  little  success.  Workers  in  the  same  trade — carpenters, 
masons,  shoemakers,  or  what  not — were  advised  to  combine  together, 
to  throw  their  tools  into  the  common  lot,  and  to  distribute  among 
themselves  the  profits  which  had  hitherto  gone  to  the  entrepreneur. 
A  fifth  of  the  annual  profits  was  to  be  laid  aside  to  build  up  a 
"  perpetual  inalienable  reserve,"  which  would  thus  grow  regularly 
every  year.  "  Without  some  such  fund,"  says  Buchez,  with 
an  unerring  instinct  for  the  future,  "  association  will  become 
little  better  than  other  commercial  undertakings.  It  will  prove 
beneficial  to  the  founders  only,  and  will  ban  everyone  who  is  not 
an  original  shareholder,  for  those  who  had  a  share  in  the  concern 
at  the  beginning  will  employ  their  privileges  in  exploiting  others."  * 
Such  is  the  destiny  that  awaits  more  than  one  co-operative  society, 
where  the  founders  become  mere  shareholders  and  employ  others 
who  are  simply  hirelings  to  do  the  work  for  them. 

Whereas  Buchez  was  greatly  interested  in  petite  industry,  *  Blanc 
was  in  favour  of  the  great  industry,  and  that  seems  to  be  the  only 
difference  between  bis  social  workshop  and  an  ordinary  co-operative 
society.  But  in  Blanc's  opinion  the  social  workshop  was  just  a 
cell  out  of  which  a  complete  collectivistic  society  would  some  day 
issue  forth.  Its  ultimate  destiny  did  not  really  interest  him  very 
much.  The  ideal  was  much  too  vague  and  too  distant  to  be  profit- 
ably discussed.  The  important  thing  was  to  make  a  beginning 
and  to  prepare  for  the  future  in  a  thoroughly  practical  fashion,  but 
"  without  breaking  altogether  with  the  past."  That  seemed  clearly 
to  be  the  line  of  procedure.  To  give  an  outline  of  what  that  future 
would  be  like  seemed  a  vain  desire,  and  would  simply  mean  out- 
lining another  Utopia. 

It  is  just  because  his  plan  was  precise  and  simple  that  Louis 
Blanc  succeeded  in  claiming  attention  where  so  many  beautiful  but 
quite  impossible  dreams  had  failed.  Here  at  last  was  a  project 
which  everyone  could  understand,  and  which,  further,  would  not  be 
very  difficult  to  adopt.  This  passion  for  the  concrete  rather  than 
the  ideal,  for  some  practical  formula  that  might  possibly  point  the 
way  out  of  the  morass  of  laissez-faire,  may  be  discovered  in  more 
than  one  of  his  contemporaries.  It  is  very  pronounced  in  Vidal's 

1  In  the  Journal  des  Sciences  morales  et  politiques,  December  17,  1831.    Only 
•me  association — the  goldsmiths',  in  1834 — wasfounded  as  the  resu'tof  this  article. 

1  Quoted  by  Festy,  Le  Mouvement  ouvrier  au  Debut  de  la  Monarchie  de 
Juillet,  p.  88  (Paris,  1908). 

*  Buchez's  proposals  for  the  reform  of  the  "gr»at  industry"  were  of  an 
entirely  different  character. 


Louis  BLANC  259 

work,  for  example.  Vidal  was  the  author  of  an  interesting  book  on 
distribution  which  unfortunately  seems  to  be  now  quite  forgotten.1 
Much  of  the  success  of  the  project,  like  that  of  the  State  Socialism 
of  a  later  period,  was  undoubtedly  due  to  this  feeling. 

The  projected  reform  seemed  exceptionally  simple.  A  national 
workshop  was  to  be  set  up  forthwith  in  which  all  branches  of  pro- 
duction would  be  represented.  The  necessary  capital  was  to  be 
obtained  from  the  Government,  which  was  expected  to  borrow  it. 
Every  worker  who  could  give  the  necessary  moral  guarantee  was 
allowed  to  compete  for  this  capital.  Wages  would  be  equal  for 
everybody,  a  thing  which  is  quite  impossible  under  present  conditions, 
largely  because  of  the  false  an ti -social  character  of  a  good  deal  of 
our  education.  In  the  future,  when  a  new  system  of  education 
will  have  improved  morality  and  begotten  new  ideas,  the  proposal 
will  seem  a  perfectly  natural  one.  Here  we  come  across  a  suggestion 
that  seems  common  to  all  the  associationists,  namely,  the  idea  of  a 
new  environment  effecting  a  revolution  in  the  ordinary  motives  of 
mankind.  As  to  the  hierarchy  of  the  workshop,  that  will  be  estab- 
lished by  election,  except  during  the  first  year,  when  the  Govern- 
ment will  undertake  to  conduct  the  organisation,  because  as  yet  the 
members  will  hardly  be  sufficiently  trained  to  choose  the  best  repre- 
sentatives. The  net  revenue  will  be  divided  into  three  portions,  of 
which  the  first  will  be  distributed  between  the  various  members  of 
the  association,  thus  contributing  to  a  rise  in  their  wages ;  the  second 
portion  will  go  towards  the  upkeep  of  the  old,  the  sick,  and  the  infirm, 
and  towards  easing  the  burdens  of  some  other  industries ;  while  the 
third  portion  will  be  spent  in  supplying  tools  to  those  who  wish  to 
join  the  the  association,  which  will  gradually  extend  its  sway  over  the 
whole  of  society.  The  last  suggestion  inevitably  reminds  us  of 
Buchez's  "  inalienable  and  perpetual  capital.  " 

Interest  will  be  paid  on  the  capital  employed  in  founding  the 
industry,  such  interest  being  guaranteed  against  taxation.  But  we 
must  not  conclude  that  Blanc  favoured  this  condition  because  he 
believed  in  the  legitimacy  of  interest,  as  Fourier  did.  He  was  too 
pronounced  a  disciple  of  the  Saint-Simonians  ever  to  admit  that 
it  was  legitimate.  The  time  will  come,  he  thinks,  when  it  will  no 
longer  be  necessary,  but  he  gives  no  hint  as  to  how  to  get  rid  of  it. 
For  the  present  at  any  rate  it  must  be  paid,  were  it  only  to  enable 
the  transition  to  be  made.  "  We  need  not  with  savage  impatience 
destroy  everything  that  has  been  founded  upon  the  abuses  which 
as  a  whole  we  are  so  anxious  to  remove.  "  The  interest  paid,  along 
1  Francois  Vidal,  Do  la  Repartition  des  Richesses  (1846). 


260  THE  ASSOCIATIVE  SOCIALISTS 

with  the  wages,  will  form  a  part  of  the  cost  of  production.  The 
capitalists,  however,  will  have  no  share  in  the  net  profit  unless  they 
have  directly  contributed  to  it. 

It  seems  that  the  only  difference  between  the  social  workshop 
and  the  present  factory  is  its  somewhat  more  democratic  organisa- 
tion, and  the  fact  that  the  workers  themselves  seize  all  the  profit 
(i.e.  over  and  above  net  interest),  instead  of  leaving  it,  as  was  hitherto 
the  case,  to  the  entrepreneur. 

But  this  social  workshop,  as  we  have  said,  is  a  mere  cell  out  of 
which  a  new  society  is  expected  to  form.  The  amusing  feature  is 
this,  that  the  new  society  can  only  come  into  being  through  the 
activity  of  competition — competition  purged  of  all  its  more  abomin- 
able features,  that  is  to  say.  "  The  arm  of  competition  must  be 
strengthened  in  order  to  get  rid  of  competition."  That  ought  not 
to  be  a  very  difficult  task,  for  the  "  social  workshop  as  compared 
with  the  ordinary  private  factory  will  effect  greater  economies  and 
have  a  better  system  of  organisation,  for  every  worker  without 
exception  will  be  interested  in  honestly  performing  his  duty  as 
quickly  as  possible.'1  On  every  side  will  private  enterprise  find 
itself  threatened  by  the  new  system.  Capital  and  workers  will 
gravitate  towards  the  social  workshop  with  its  greater  advantages. 
Nor  will  the  movement  cease  until  one  vast  association  has  been 
formed  representing  all  the  social  shops  in  the  same  industry.  Every 
important  industry  will  be  grouped  round  some  central  factory,  and 
"  the  different  shops  will  be  of  the  nature  of  supplementary  establish- 
ments." To  crown  the  edifice,  the  different  industries  will  be  grouped 
together,  and,  instead  of  competing  with  one  another,  will  materially 
help  and  support  each  other,  especially  during  a  time  of  crisis,  so 
that  the  understanding  existing  between  them  will  achieve  a  still 
more  remarkable  success  in  preventing  crises  altogether. 

Thus  by  merely  giving  it  greater  freedom  the  competitive  regime 
will  gradually  disappear,  to  make  way  for  the  associative  regime, 
and  as  the  social  workshops  realise  these  wonderful  ideals  the  evils 
of  competition  will  disappear,  and  moral  and  social  life  will  be 
cleansed  of  its  present  evils. 

The  remarkable  feature  of  the  whole  scheme  is  that  hardly 
anything  new  is  needed  to  effect  this  vast  change.  Just  a  little 
additional  pressure  on  the  part  of  Government,  some  capital  to 
set  up  the  workshops,  and  a  few  additional  regulations  to  guide 
it  in  its  operations,  that  is  all. 

This  is  really  a  very  important  point  in  Louis  Blanc's  doctrine, 
which  clearly  differentiates  it  both  from  Owen's  and  Fourier's. 


Louis  BLANC  261 

They  appeared  to  think  that  the  State  was  not  necessary  at  all : 
private  initiative  seemed  quite  sufficient.  It  was  hoped  that  society 
would  renew  itself  spontaneously  without  any  extraneous  aid,  and 
this  is  still  the  working  creed  of  the  co-operative  movement. 
Wherever  the  co-operative  movement  has  flourished  the  result  has 
been  entirely  due  to  the  efforts  of  its  members.  But  Louis  Blanc's 
attention  was  centred  on  the  highly  trained  artisan,  and  the  problem 
was  to  find  capital  to  employ  him.  Were  they  to  rely  upon  their 
own  savings,  they  would  never  make  a  beginning.1  Moreover,  some- 
body must  start  the  thing,  and  power  is  wanted  for  this.  That  power 
will  be  organised  force,  which  will  be  employed,  however,  not  so 
much  as  an  ally,  but  rather  as  a  "  starter."  Intervention  will  neces- 
sarily be  only  temporary.  Once  the  scheme  is  started  its  own 
momentum  will  keep  it  going.  The  State,  so  to  speak,  "  will  just 
give  it  a  push :  gravity  and  the  laws  of  mechanics  will  suffice  for 
the  rest."  That  is  just  where  the  ingenuity  of  the  whole  system 
comes  in,  and  as  a  matter  of  fact  the  majority  of  the  producing  co- 
operative societies  now  at  work  owe  their  existence  to  the  financial 
aid  and  administrative  ability  of  public  bodies,  without  which  they 
could  hardly  keep  going. 

Louis  Blanc,  accordingly,  is  one  of  the  first  socialists  to  take 
care  to  place  the  burden  of  reform  upon  the  shoulders  of  the  State. 
Rodbertus  and  Lassalle  make  an  exactly  analogous  appeal  to  the 
State,  and  for  this  reason  the  French  writer  deserves  a  place  among 
the  pioneers  of  State  Socialism. 

This  appeal  of  the  socialists  is  beautifully  naive.  On  the  one 
hand  they  invite  the  adherence  of  Government  to  a  proposal  that  is 
frankly  revolutionary,  in  which  case  it  is  asked  to  compass  its  own 
destruction — naturally  not  a  very  attractive  prospect.  On  the 
other  hand  the  project  seems  harmless  enough,  and  the  support 
which  the  Government  is  asked  to  extend  further  emphasises  the 
modest  nature  of  the  undertaking.  State  socialism  cannot  escape 
the  horns  of  this  dilemma  by  proclaiming  itself  frankly  conservative, 
as  it  has  done  in  Germany. 

1  "  Tha  emancipation  of  the  working  classes  is  a  very  complicated  business, 
It  is  bound  up  with  so  many  other  questions  and  involves  such  profound  changes 
of  habit.  So  numerous  are  the  various  interests  upon  which  an  apparent  though 
perhaps  not  a  real  attack  is  contemplated,  that  it  would  be  sheer  folly  to  imagine 
that  it  could  ever  be  accomplished  by  a  series  of  efforts  tentatively  undertaken 
and  partially  isolated.  The  whole  power  of  the  State  will  be  required  if  it  is 
to  succeed.  What  the  proletarian  lacks  is  capital,  and  the  duty  of  the  State 
is  to  see  that  he  gets  it.  Were  I  to  define  the  State  I  should  prefer  to  think  of 
it  as  the  poor  man's  bank."  (Organiiation  du  Travail,  p.  14.) 


262  THE  ASSOCIATIVE  SOCIALISTS 

Louis  Blanc,  like  Lassalle  after  him,  was  much  concerned  with 
immediate  results,  and  he  failed  to  notice  this  objection.  He  paid 
considerable  attention  to  another  line  of  criticism,  however,  and 
one  that  he  considered  much  more  dangerous.  He  sought  a  way 
of  escape  by  using  an  argument  which  was  afterwards  frequently 
employed  by  the  State  Socialists,  as  we  shall  see  by  and  by. 

The  question  was  whether  State  intervention  is  contrary  to 
liberty  or  not.  "  It  clearly  is,"  says  Louis  Blanc,  "  if  you  conceive 
of  liberty  as  an  abstract  right  which  is  conferred  upon  man  by  the 
terms  of  some  constitution  or  other.  But  that  is  no  real  liberty  at 
all.  Full  liberty  consists  of  the  power  which  man  has  of  developing 
and  exercising  his  faculties  with  the  sanction  of  justice,  and  the 
approval  of  law."1  The  right  to  liberty  without  the  opportunity 
of  exercising  it  is  simply  oppression,  and  wherever  man  is  ignorant 
or  without  tools  he  inevitably  has  to  submit  to  those  who  are  either 
richer  or  better  taught  than  himself,  and  his  liberty  is  gone.  In 
such  cases  State  intervention  is  really  necessary,  just  as  it  is  in  the 
case  of  inferior  classes  or  minors.  Lacordaire's  saying  is  more  pithy 
still :  "  As  between  the  weak  and  the  strong,  liberty  oppresses  and 
law  sets  free."  Sismondi  had  already  employed  this  argument,  and 
much  capital  has  been  made  of  it  by  every  opponent  of  laissez-faire? 

In  the  writings  of  Louis  Blanc  may  be  found  the  earliest  faint 
outline  of  a  movement  that  had  assumed  considerable  proportions 
before  the  end  of  the  century.  State  socialism,  which  was  as  yet  a 
temporary  expedient,  by  and  by  becomes  an  important  economic 
doctrine  with  numerous  practical  applications. 

The  events  of  1848  gave  Louis  Blanc  an  opportunity  of  partly 
realising  his  ideas.  We  shall  speak  of  these  experiments  when  we 
come  to  discuss  the  misdirected  efforts  of  the  1848  socialists.  But 
the  ideas  outlined  in  the  Organisation  du  Travail  were  destined  to  a 
more  permanent  success  in  the  numerous  co-operative  productive 

1  "  The  illusive  conception  of  an  abstract  right  has  had  a  great  hold  upon 
the  public  ever  since  1789.  But  it  is  nothing  better  than  a  metaphysical  abstrac- 
tion, which  can  afford  but  little  consolation  to  a  people  who  have  been  robbed 
of  a  definite  security  that  was  really  theirs.  The  '  rights  of  man,'  proclaimed 
with  pomp  and  defined  with  minuteness  in  many  a  charter,  has  simply  served  as 
a  cloak  to  hide  the  injustice  of  individualism  and  the  barbarous  treatment  meted 
out  to  the  poor  under  its  aegis.  Because  of  this  practice  of  defining  liberty  as  a 
right,  men  have  got  into  the  habit  of  calling  people  free  even  though  they  are 
the  slaves  of  hunger  and  of  ignorance  and  the  sport  of  every  chance.  Let  us 
say  once  for  all  that  liberty  consists,  not  in  the  abstract  right  given  to  a  man, 
but  in  the  power  given  him  to  exercise  and  develop  his  faculties."  (Organisation 
du  Travail,  p.  19.) 

2Cf.  pp.  186  et  teq. 


Louis  BLANC  263 

societies  which  were  founded  as  a  result  of  its  teaching.     They  are 
still  quite  popular  with  a  certain  class  of  French  working  men. 

Though  inferior  to  both  Fourier  and  Owen,  Blanc  gave  consider- 
able impetus  to  the  Associative  movement,  and  quite  deserves  his 
place  among  the  Associative  socialists. 

Beside  Louis  Blanc  it  may  be  convenient  to  refer  to  two  other 
writers,  Leroux  and  Cabet,  who  took  part  in  the  same  movement 
right  up  to  the  Revolution  of  1848. 

Pierre  Leroux  exercised  considerable  influence  over  his  contem- 
poraries. George  Sand's  works  are  full  of  social  dissertations,  and 
she  herself  declares  that  most  of  these  she  owed  to  Leroux.  How- 
ever, one  can  hardly  get  anything  of  the  nature  of  a  definite  contri- 
bution to  the  science  from  his  own  writings,  which  are  vaguely 
humanitarian  in  character.  We  must  make  an  exception,  perhaps, 
of  his  advocacy  of  association,1  and  especially  of  the  idea  of  solidarity, 
a  word  that  has  been  exceedingly  fortunate  in  its  career.  Indeed, 
it  seems  that  he  was  the  first  to  employ  this  famous  term  in  the 
sense  in  which  it  is  used  to-day — as  a  substitute  for  charity.* 

Apparently,  also,  he  was  the  first  to  contrast  the  word  "  socialism  " 
with  its  antithesis  "  individualism."  3  The  invention  of  these  two 
terms  is  enough  to  save  his  name  from  oblivion  in  the  opinion  of 
every  true  sociologist. 

Cabet  had  one  experience  which  is  rare  for  a  socialist  :  he  had 
filled  the  office  of  Attorney- General,  though  only  for  a  short  time 
it  is  true.  Far  greater  celebrity  came  to  him  from  the  publication 
of  his  novel,  Le  Voyage  en  Icarie.  There  is  nothing  very  original  in 
the  system  outlined  there.  He  gives  the  usual  easy  retort  to  those 
who  question  him  concerning  the  fate  of  idlers  in  Icaria  :  "  Of  idlers 
in  Icaria  there  will  be  none."  In  his  enthusiasm  for  his  ideal  he 

1  "  Your  want  of  faith  in  association,"  he  wrote  to  the  National  Assembly 
of  1848,  "  will  force  you  to  expose  civilisation  to  a  terribly  agonising  death." 

1  L 'Humanity  (1840).  It  would  be  wrong  to  conclude,  however,  that  this 
desire  for  secularising  charity  meant  that  Leroux  was  anti-religious.  On  the 
contrary,  he  admits  his  indebtedness  for  the  conception  of  solidarity  to  the 
dictum  of  St.  Paul,  "  We  are  all  members  of  one  body." 

•  "  I  was  the  first  to  employ  the  term  '  socialism.'  It  was  a  neologism  then, 
but  a  very  necessary  term.  I  invented  the  word  as  an  antithesis  to  'indivi- 
dualism.'"  (Qrtvede  Samarez,  p.  288.)  As  a  matter  of  fact,  as  far  back  as  1834 
he  had  contributed  an  article  entitled  De  Vlndividiialisme  et  du  Socialisms  to  the 
Revue  encyclopidique.  The  same  word  occurs  in  the  same  review  in  an  article 
entitled  Discoura  sur  la  Situation  actuette  de  VEsprit  humain,  written  two  years 
before.  See  his  complete  works,  vol.  i,  pp.  121,  161,  378.  For  a  further  account 
of  Leroux  see  M.  F.  Thomas's  Pierre  Ltroux  (1906),  a  somewhat  dull  but 
highly  imaginative  production. 


264  FRIEDRICH  LIST 

went  farther  than  either  Owen  or  Considerant  by  personally  super- 
intending the  founding  of  a  colony  in  the  United  States  (1848). 
Despite  many  a  grievous  trial  the  settlement  managed  to  exist  for 
fifty  years,  finally  coming  to  grief  in  1898.1 

Cabet  is  frankly  communistic,  and  in  that  respect  resembles 
Owen  rather  than  Fourier,  although  he  always  considered  himself  a 
disciple  of  the  latter.  But  this  was  perhaps  due  to  his  admiration 
for  Fourier,  with  whom  he  was  personally  very  well  acquainted. 
Although  he  was  a  communist  he  was  no  revolutionist.  He  was  a 
good-natured  fellow  who  believed  in  making  his  appeal  to  the 
altruistic  feelings  of  men,  and  was  sufficiently  optimistic  to  believe 
that  moral  conversion  was  not  a  difficult  process.8 


CHAPTER  IV :  FRIEDRICH  LIST  AND  THE 
NATIONAL  SYSTEM  OF  POLITICAL  ECONOMY 

BY  the  middle  of  the  nineteenth  century  the  doctrine  of  Adam 
Smith  had  conquered  the  whole  of  Europe.  Former  theories  were 
forgotten  and  no  rival  had  appeared  to  challenge  its  supremacy.  But 
during  the  course  of  its  triumphant  march  it  had  undergone  many 
changes  and  had  been  subjected  to  much  criticism.  Even  disciples 
like  Say  and  Malthus,  and  Ricardo  especially,  had  contributed  many 
important  additions  and  effected  much  improvement.  Through  the 
influence  of  Sismondi  and  the  socialists  new  points  of  view  had  been 
gained,  involving  a  departure  from  the  narrow  outlook  of  the  master 
in  the  direction  of  newer  and  broader  horizons. 

Of  the  principles  of  the  Classical  school  the  Free  Trade  theory 
was  the  only  one  which  still  remained  intact.  This,  however, 
was  the  most  important  of  all.  Here  the  triumph  had  been  com- 
plete. Freedom  of  international  trade  was  accepted  as  a  sacred 
doctrine  by  the  economists  of  every  country.  In  Germany  as  in 
England,  hi  France  as  in  Russia,  there  was  complete  unanimity  among 
scientific  authorities.  The  socialists  at  first  neglected  this  topic,  and 
when  they  did  mention  it  it  was  to  express  their  complete  approval 
of  the  orthodox  view. 3  A  few  isolated  authors  might  have  hinted  at 

1  For  Cabet's  life  and  the  story  of  Icaria  see  Prudhommeaux's  two  volumes, 
fitienne  Cabet  and  Histoire  de  la  Communauti  icarienne. 

1  "  The  communista  will  never  gain  much  success  until  they  have  learned 
to  reform  themselves.  Let  them  preach  by  example  and  by  the  exercise  of 
social  virtues,  and  they  will  soon  convert  their  adversaries." 

•  Protection  was  attacked  by  Sismondi  in  Nouv.  Princ.,  Book  IV,  chap.  11. 
He  considered  it  a  fruitful  source  of  over-production,  and  uttered  his  condem- 


FRIEDRICH  LIST  265 

reservations  or  objections,  but  they  never  caught  the  public  ear.1 
It  is  true  that  Parliaments  and  Governments  in  many  countries 
hesitated  to  put  these  new  ideas  into  practice.  But  even  here, 
despite  the  strength  of  the  opposing  forces,  one  can  see  the  growing 
influence  of  Smith's  doctrine.  The  liberal  tariff  of  Prussia  in  181 8r 
the  reforms  of  Huskisson  in  England  (1824-27),  were  expressly 
conceived  by  their  authors  as  partial  applications  of  those  principles. 
However,  there  arose  in  Germany  a  new  doctrine  for  which  the 
peculiar  economic  and  political  conditions  of  that  country  at  the 
beginning  of  the  nineteenth  century  afforded  a  favourable  environ- 
ment. Although  the  development  was  slow  it  was  none  the  less 
startling.  Friedrich  List,  in  his  work  entitled  Das  Nationals  System 
der  Politischen  Oekonomie,  promulgated  the  theory  of  the  new  Protec- 
tion. "  The  history  of  my  book,"  he  remarks  in  his  preface,  **  is 
the  history  of  half  my  life."  He  might  have  added  that  it  was  also 
the  history  of  Germany  from  1800  to  1840.  It  was  no  mere  co- 
incidence that  led  to  the  creation  of  an  economic  system  based 
exclusively  upon  the  conception  of  nationality  in  that  country, 
where  the  dominant  political  note  throughout  the  nineteenth  century 
was  the  realisation  of  national  unity.  List's  work  was  a  product 
of  circumstances,  and  these  circumstances  we  must  understand  if 
we  are  to  judge  of  the  author  and  his  work. 

nation  of  the  absurd  desire  of  nations  for  self-sufficiency.  Saint-Simon  con* 
sidered  Protection  to  be  the  outcome  of  international  hatred  (CEuvrea,  vol.  iii, 
p.  36),  and  commended  the  economists  who  had  shown  that  "  mankind  had  but 
one  aim  and  that  its  interests  were  common,  and  consequently  that  each  individual 
in  his  social  connection  must  be  viewed  as  one  of  a  company  of  workers  "  (Lettre* 
a  un  Americaine,  (Euvres,  voL  ii,  pp.  186-187).  The  Saint-Simonians  never 
touched  upon  the  question  directly,  but  it  is  quite  clear  that  Protective  rights 
were  to  have  no  place  in  the  universal  association  of  which  they  dreamt.  Accord- 
ing to  Fourier,  there  was  to  be  the  completest  liberty  in  the  circulation  of  goods 
among  the  Phalansteres  all  the  world  over.  (Cf.  Bourgin,  Fourier,  pp.  326-329  ; 
Paris,  1905.) 

1  We  refer  to  two  of  them  only  :  Augustin  Cournot  and  Louis  Say  of  Nantes. 
The  former,  in  his  Becherches  sur  lea  Principea  moth'matiquea  de  la  Theorie  dea 
Richess&s  (1838),  a  work  that  is  celebrated  to-day  but  which  passed  unnoticed 
at  the  time  of  its  publication,  has  criticised  the  theory  of  Free  Trade.  But  the 
reputation  which  he  subsequently  achieved  was  not  based  upon  this  part  of  the 
book.  Louis  Say  (1774-1840)  was  a  brother  of  J.  B.  Say.  He  published  a 
number  of  works,  now  quite  forgotten,  in  which  he  criticised  several  doctrines 
upheld  by  his  brother,  whose  displeasure  he  thus  incurred.  We  refer  to  his  last 
work,  Etudes  sur  la  Richesse  des  Nations  et  Refutation  des  principals  Erreura  en 
JSconomie  politique  (1836),  for  this  is  the  work  to  which  List  alludes.  It  is 
probable  that  Louis  Say's  name  would  have  remained  in  oblivion  but  for 
List.  Richelot,  in  his  translation  of  List  (second  edition,  p.  477),  quotes  some  of 
the  more  important  passages  of  Say's  book. 


266  FRIEDRICH  LIST 

I  :  LIST'S  IDEAS  IN  RELATION  TO  THE  ECONOMIC 
CONDITIONS  IN  GERMANY 

THE  Germany  of  the  nineteenth  century  presents  a  unique  spec- 
tacle. Her  population  was  at  first  essentially  agricultural,  and  the 
various  states  politically  and  economically  isolated.  Her  industry 
was  fettered  by  the  corporative  regime,  and  her  agriculture  was  still 
in  feudal  thraldom.  Freed  from  these  encumbrances,  and  having 
established  first  her  economic  and  then  her  political  unity,  she  took 
her  place  during  the  last  three  decades  of  the  century  among  the 
foremost  of  industrial  Powers. 

The  Act  of  Union  of  1800  had  ensured  the  economic  unity  of  the 
British  Isles.  The  union  of  England  and  Scotland  was  already  a 
century  old,  and  Smith  regarded  it  as  "  one  of  the  chief  causes  of  the 
prosperity  of  Great  Britain."  1  France  had  accomplished  the  same 
end  by  the  suppression  of  domestic  tariffs  in  1791.  But  Germany 
even  in  1815  was  still  a  congeries  of  provinces,  varying  in  im- 
portance and  separated  from  one  another  by  tariff  walls.  List,  in 
the  petition  which  he  addressed  in  1819  to  the  Federal  Assembly  in 
the  name  of  the  General  Federation  of  German  Trade  and  Com- 
merce, could  reckon  no  less  than  thirty- eight  kinds  of  tariffs  within 
the  German  Confederacy,  without  mentioning  other  barriers  to 
commerce.  In  Prussia  alone  there  were  no  fewer  than  sixty-seven 
different  tariffs.8  "In  short,"  says  List  in  another  petition,  "while 
other  nations  cultivate  the  sciences  and  the  arts  whereby  commerce 
and  industry  are  extended,  German  merchants  and  manufacturers 
must  devote  a  great  part  of  their  time  to  the  study  of  domestic 
tariffs  and  taxes."  * 

These  inconveniences  were  still  further  aggravated  by  the  com- 
plete absence  of  import  duties.  The  German  states  were  closed  to 
one  another,  but,  owing  to  the  absence  of  effective  central  control,  were 
open  to  other  nations — a  peculiarly  galling  situation  on  the  morrow 
of  the  Continental  Blockade.  The  peace  treaty  was  scarcely  signed 

1  The  union  of  England  and  Scotland  dates  from  1707.     Compare  the  pas- 
sage in  Adam  Smith,  Book  V,  chap.  2,  part  ii,  art.  4 ;  Carman's  edition,  voL  ii, 
p.  384. 

2  List,  Werktj  ed.  Hausser,  vol.  ii,  p.  17.    The  seventh  edition  of  the  National 
System,  which  was  published  hi  1883  by  M.  Eheberg,  contains  an  excellent 
historical   and   critical  introduction.     Our   quotations   are   from   the   English 
translation  by  Lloyd,  published  in   1885,  republished,   with  introduction   by 
Professor  Shield  Nicholson,  in  1909. 

*  Petition  presented  to  a  meeting  of  the  German  princes  at  Vienna  in  1820 
(IFerie,YoLii,p.27). 


LIST  AND  ECONOMIC  CONDITIONS  IN  GERMANY  267 

when  England — so  long  cut  off  from  her  markets  and  forced  to  over- 
stock her  warehouses  with  her  manufactured  goods — began  to  flood 
the  Continent  with  her  products.  Driven  from  France  by  the  pro- 
tective tariff  established  by  the  Restoration  Government,  these  goods, 
offered  at  ridiculously  low  prices,  found  a  ready  market  in  Germany. 

The  German  merchants  and  manufacturers  became  thoroughly 
alarmed,  and  there  arose  a  general  demand  for  economic  unity  and  a 
uniform  tariff.  Public  opinion  urged  a  reform  which  appeared  to 
be  the  first  step  in  the  movement  towards  national  unity.  In  1818 
Prussia  secured  her  own  commercial  unity  by  abolishing  all  internal 
taxation,  retaining  only  those  duties  which  were  levied  at  the 
frontier.  Her  new  tariff  of  10  per  cent,  on  manufactured  goods, 
with  free  entrance  for  raw  material,  was  not  regarded  as  prohibitive, 
and  was  actually  approved  of  by  Huskisson  as  a  model  which  the 
British  Parliament  might  well  imitate.  But  this  reform,  confined  as 
it  was  to  Prussia  alone,  did  nothing  to  improve  the  lot  of  the  German 
merchants  elsewhere,  for  the  Prussian  tariff  applied  just  as  much  to 
them  as  to  foreigners. 

This  particular  reform,  far  from  staying  the  movement  towards 
uniform  import  duties,  only  accelerated  it.  A  General  Association 
of  German  Manufacturers  and  Merchants  was  founded  at  Frankfort 
in  1819  to  urge  confederation  upon  the  Government.  The  agita- 
tion was  inspired  by  Friedrich  List.  He  had  been  for  a  short  time  pro- 
fessor at  Tubingen  and  was  already  well  known  as  a  journalist.  He 
was  nominated  general  secretary  of  the  association,  and  became  the 
soul  of  the  movement.  He  wrote  endless  petitions  and  articles,  and 
made  personal  application  to  the  various  Governments  at  Munich, 
Stuttgart,  Berlin,  and  Vienna.  He  was  anxious  that  Austria  should 
take  the  lead.  But  all  in  vain.  The  Federal  Assembly,  hostile  as 
it  was  to  every  manifestation  of  public  opinion,  refused  to  reply  to 
the  petition  of  the  merchants  and  manufacturers.  List  himself  was 
soon  taken  up  with  other  interests.  He  was  named  as  the  deputy 
for  Reutlingen,  his  native  town,  in  the  state  of  Wiirtemberg,  in  1820, 
bnt  was  banished  from  the  Assembly  and  condemned  to  ten  months' 
imprisonment  for  criticising  the  bureaucracy  of  his  own  country. 
After  seeking  refuge  in  France  he  spent  a  few  years  travelling  in 
England  and  Switzerland,  and  then  returned  to  Wlirtemberg,  where 
he  again  suffered  imprisonment.  Upon  his  release  from  prison  he 
resolved  to  emigrate  to  America,  where  Lafayette,  whom  he  had 
met  in  Paris,  promised  him  a  warm  welcome. 

Returning  to  Germany  in  1832,  after  having  made  numerous 
friends  and  accumulated  a  fortune,  he  found  the  tariff  movement  for 


268  FRIEDRICH  LIST 

which  he  had  struggled  thirteen  years  before  just  coming  to  a  head. 
It  was  to  be  established,  however,  in  a  fashion  quite  different  from 
what  he  had  expected.  It  was  not  to  be  a  general  reform,  and 
Austria  was  not  to  be  leader.  Prussia  was  to  be  the  pivot  of  the 
movement,  which  was  to  be  accomplished  by  means  of  a  series  of 
general  agreements.  In  1828  there  were  formed  almost  simultaneously 
two  Tariff  Unions,  the  one  between  Bavaria  and  Wurtemberg,  the 
other  between  Prussia  and  Hesse-Darmstadt.  Within  the  areas  of 
both  of  these  unions  goods  were  to  circulate  freely,  and  a  common 
rate  of  duty  was  to  be  established  at  the  frontiers.  From  the  very 
first  there  was  a  rapprochement  between  the  unions,  but  a  definite 
fusion  in  one  Zollverem  was  only  decided  upon  on  March  22,  1833. 
The  new  regime  actually  came  into  being  on  January  1,  1834. 
Even  before  that  date  Saxony  and  some  of  the  other  states  had 
already  joined  the  new  union. 

Thus  by  1834  the  commercial  union  of  modern  Germany  was 
virtually  accomplished.  The  Zollverein  united  the  principal  German 
states,1  Austria  excepted,  and  under  this  regime  industry,  assured 
of  a  large  domestic  market,  increased  by  leaps  and  bounds.  But  a 
new  problem  presented  itself,  namely,  what  system  of  taxation  was 
to  be  adopted  by  the  union  as  a  whole.  In  1834  the  liberal  Prussian 
tariff  of  1818  was  adopted  without  much  opposition,  but  nothing 
more  was  attempted  just  then.  Many  of  the  manufacturers,  how- 
ever, especially  the  iron-smelters  and  the  cotton  and  flax  spinners, 
demanded  a  more  substantial  means  of  protection  against  foreign 
competition.  This  clamour  became  more  intense  as  the  need  for 
iron  and  manufactured  goods  increased  the  demand  for  raw  material. 
Hence  from  1841 — the  date  of  the  completed  Zollverein — a  new 
discussion  arose  between  the  partisans  of  the  status  quo,  inclining 
towards  free  exchange,  and  the  advocates  of  a  more  vigorous 
protection. 

List's  National  System,  advocating  Protection,  appeared  at  the 
psychological  moment.  This  delightfully  eloquent  work  is  full  of 
examples  borrowed  from  history  and  experience.  The  peculiar 
condition  of  contemporary  Germany  was  the  one  source  of  List's 
inspiration,  and  since  the  work  was  written  for  the  public  at  large 
it  is  remarkably  free  from  all  traces  of  the  "  schools."  Germany's 
industry,  the  sole  hope  of  her  future  greatness,  had  found  scope  for 
development  only  during  the  peace  which  followed  1815.  It  was  still 

1  Baden,  Nassau,  and  Frankfort  joined  in  1835  and  1836.  But  there  still 
remained  outside  Mecklenburg  and  the  Free  Towns  of  the  Hanse,  Hanover, 
Brunswick,  and  Oldenburg. 


LIST  AND  ECONOMIC  CONDITIONS  IN  GERMANY    269 

in  its  infancy,  and  found  itself  hard  hit  by  the  competition  of 
England,  with  her  long  experience,  her  perfected  machinery,  and 
her  gigantic  output.  This  was  the  all-important  fact  for  List. 
England,  whose  rivalry  appeared  so  dangerous,  had  closed  her 
markets  to  German  agriculturists  by  her  Corn  Laws,  while  industrial 
competition  was  out  of  the  question.  Two  other  nations,  France 
and  the  United  States,  destined,  like  Germany,  to  become  great  in- 
dustrial Powers,  indicated  the  path  of  emancipation.  France, 
warned  by  the  results  of  the  Treaty  of  Eden  (1786)  as  to  the  evils 
of  English  competition,  hastened  to  defend  her  fortunes  by  means  of 
prohibitive  tariffs.  Still  more  significant  was  the  example  of  the 
United  States,  whose  situation  was  in  all  respects  comparable  with 
that  of  Germany.  In  both  cases  economic  independence  was  hardly 
yet  fully  established,  the  natural  resources  were  abundant,  the 
territory  was  vast,  the  population  intelligent  and  industrious,  with 
the  hope  of  a  great  political  future.  Though  scarcely  free  as  yet,  the 
Americans  made  the  establishment  of  industry  and  the  shutting  out 
of  English  goods  by  means  of  protective  tariffs  their  first  care.  Thus 
there  was  everywhere  the  same  danger,  the  tyrannical  supremacy 
of  England,  and  the  same  method  of  defence,  Protection.  Would 
Germany  alone  stand  aloof  from  adopting  similar  measures  ? 

That  is  the  essential  point  of  List's  thesis.  But  these  very  prac- 
tical views  tended  to  damage  the  well-known  arguments  of  those 
economists  whom  List  refers  to  collectively  as  "  the  school."  The 
"  school  "  maintained  that  nations  as  well  as  individuals  should  buy 
in  the  cheapest  markets  and  devote  all  their  energies  to  producing 
just  those  commodities  which  yield  them  the  greatest  gain.  Industry 
can  only  grow  in  proportion  to  the  amount  of  capital  saved,  but  a 
protective  regime  hinders  accumulation  and  so  defeats  its  own  end. 
To  overcome  these  objections  it  is  not  necessary  to  combat  them 
one  by  one,  for  the  discussion  may  be  carried  to  an  entirely  different 
field.  The  "  school  "  adopts  a  certain  ideal  of  commercial  policy 
as  the  basis  of  its  thesis,  namely,  the  increase  of  consumable  wealth, 
or,  as  List  puts  it,  in  an  awkward  enough  fashion,  "  the  increase  of 
its  exchangeable  values."  *  This  fundamental  point  of  view  must 

1  List's  expression  "  exchangeable  value  "  merely  signifies  the  mass  of  present 
advantages — the  material  profit  existing  at  the  moment.  It  is  not  a  very  happy 
phrase,  and  it  would  be  a  great  mistake  to  take  it  literally  or  to  attach  great 
importance  to  it.  In  his  Letters  to  Ingersoll,  p.  186,  he  gives  expression  to  the 
same  idea  by  saying  that  Smith's  school  had  in  view  "  the  exchange  of  one 
material  good  for  another,"  and  that  its  concern  was  chiefly  with  "  such  exchanged 
goods  rather  than  with  productive  forces."  We  note  that  List  never  speaks  of 
Ricardo,  but  only  of  Smith  and  Say,  whose  works  alone  he  seems  to  have  read. 


270  FREEDRICH  LIST 

be  changed  if  we  would  avoid  the  consequences  which  naturally 
follow  from  it.  List  realised  this,  and  in  his  attempt  to  accomplish 
the  task  he  gave  expression  to  new  truths  which  make  his  book 
one  of  lasting  theoretical  value  and  ensure  for  it  an  important  place 
hi  the  history  of  economic  doctrines. 

In  fact,  he  introduces  two  ideas  that  were  new  to  current  theory, 
namely,  the  idea  of  nationality  as  contrasted  with  that  of  cosmopoli- 
tanism, and  the  idea  of  productive  power  as  contrasted  with  that  of 
exchange  values.  List's  whole  system  rests  upon  these  two  ideas. 

(a)  List  accuses  Adam  Smith  and  his  school  of  cosmopolitanism. 
Their  hypothesis  rested  on  the  belief  that  men  were  henceforth  to 
be  united  in  one  great  community  from  which  war  would  be  banished. 
On  such  a  hypothesis  humanity  was  merely  the  sum  of  its  individuals. 
Individual  interests  alone  counted,  and  any  interference  with  econo- 
mic liberty  could  never  be  justified.  But  between  man  and  humanity 
must  be  interpolated  the  history  of  nations,  and  the  "  school "  had 
forgotten  this.  Every  man  forms  part  of  some  nation,  and  his 
prosperity  to  a  large  extent  depends  upon  the  political  power  of  that 
nation.1 

Universal  entente  is  doubtless  a  noble  end  to  pursue,  and  we 
ought  to  hasten  its  accomplishment.  But  nations  to-day  are  of 
unequal  strength  and  have  different  interests,  so  that  a  definite  union 
could  only  benefit  them  if  they  met  on  a  footing  of  equality.  The 
union  might  even  only  benefit  one  of  them  while  the  others  became 
dependent.  Viewed  hi  this  new  light,  political  economy  becomes 
the  science  which,  by  taking  account  of  the  actual  interests  and  of 
the  particular  condition  of  each  nation,  shows  along  what  path  each 
may  rise  to  that  degree  of  economic  culture  at  which  union  with 
other  civilised  nations,  accompanied  by  free  exchange,  might  be  both 
possible  and  usefuL2 

List  distinguishes  several  "  degrees  of  culture,"  or  what  we  would 
to-day  call  "  economic  stages,"  and  he  even  claims  actual  historical 
sequence  for  his  classification  into  the  savage,  the  pastoral,  the 

1  "  In  the  TfaJian  and  the  Hanseatio  cities,  in  Holland  and  England,  in  France 
and  America,  we  find  the  powers  of  production  and  consequently  the  wealth  of 
individuals  growing  in  proportion  to  the  liberties  enjoyed,  to  the  degree  of 
perfection  of  political  and  social  institutions,  while  these,  on  the  other  hand,  derive 
material  and  stimulus  for  their  further  improvement  from  the  increase  of  the 
material  wealth  and  the  productive  power  of  individuals."  (National  System, 
p.  87.) 

8  He  defines  "  political  or  national  economy  "  aa  "  that  which,  emanating 
from  the  idea  and  nature  of  the  nation,  teaches  how  a  given  nation,  in  the  present 
state  of  the  world  and  its  own  special  national  relations,  can  maintain  and 
improve  its  economical  condition  ."  (Ibid.,  p.  99.) 


LIST  AND  ECONOMIC  CONDITIONS  IN  GERMANY    271 

agricultural,  the  agricultural-manufacturing,  and  the  agricultural- 
manufacturing-commercial  stage.1  A  nation  becomes  "  normal "  8 
only  when  it  has  attained  the  last  stage.  List  understands  by  this 
that  such  is  the  ideal  that  a  nation  ought  to  follow.  As  a  matter  of 
fact  he  would  allow  it  to  possess  a  navy  and  to  found  colonies  only 
on  condition  that  it  kept  up  its  foreign  trade  and  extended  its  sphere 
of  influence.  It  is  only  at  this  stage  that  a  nation  can  nourish  a  vast 
population,  ensure  a  complete  development  of  the  arts  and  sciences, 
and  retain  its  independence  and  power.  The  last  two  ideas  con- 
stitute the  sine  qua  non  of  nationality.3  Not  all  nations,  it  is  true, 
can  pretend  to  this  complete  development.  It  requires  a  vast 
territory,  with  abundant  natural  resources,  and  a  temperate  climate, 
vehich  itself  aids  the  development  of  manufactures.4  But  where 

1  It  was  the  example  of  England  that  gave  List  the  idea,  but  the  whole  con- 
ception ia  based  upon  a  historical  error.  England  possessed  a  navy,  had  founded 
colonies  and  developed  her  international  trade  long  before  she  became  a  manu- 
facturing nation.  Since  the  time  of  List  various  categories  of  national  develop- 
ment have  been  proposed.  Hildebrand  speaks  of  periods  of  natural  economy, 
of  money  economy,  and  of  credit  economy  (Jahrbiicker  fur  National  Oeleonomie, 
vol.  ii,  pp.  1-24).  Bticher  proposed  the  periods  of  domestic  economy,  of 
town  economy,  and  of  national  economy  as  a  substitute  (Die  Entxtchung  der 
Volkswirtschaft,  3rd  ed.,  p.  108).  Sombart,  in  his  turn,  has  very  justly 
criticised  this  classification  in  his  book  Dm  modems  Kapitalismus  (vol.  i,  p.  51; 
Leipzig,  1902).  But  would  that  which  he  proposes  himself  be  much  better  ? 

No  one,  we  believe,  has  as  yet  remarked  that  List  borrowed  this  enumeration 
of  the  different  economic  states,  almost  word  for  word,  from  Adam  Smith. 
In  chap.  5  of  Book  II,  speaking  of  the  various  employments  of  capital,  Smith 
clearly  distinguished  between  three  stages  of  evolution — the  agricultural  state, 
the  agricultural-manufacturing,  and  the  agricultural- manufacturing-commercial. 
Smith  considered  that  this  last  stage  was  the  most  desirable,  but  in  his  opinion  its 
realisation  must  depend  upon  the  natural  course  of  things. 

a  The  term  "  normal "  is  one  of  the  vaguest  and  most  equivocal  we  have  in 
political  economy.  It  would  be  well  if  we  were  rid  of  it  altogether.  What 
controversies  have  not  raged  around  the  ideas  of  a  normal  wage  or  a  normal 
price  1  One  of  the  chief  merits  of  the  Mathematical  school  lies  in  the  success 
with  which  it  has  effected  the  substitution  of  the  idea  of  an  equilibrium  price. 
The  idea  of  a  normal  nation  is  about  as  vague  as  that  of  a  normal  wage,  and 
it  is  curious  that  our  author  describes  as  normal  a  whole  collection  of  charac- 
teristics which,  according  to  his  own  account,  were  at  the  moment  when  he 
wrote  only  realised  by  one  nation,  namely,  England. 

8  P.  292.  The  idea  of  national  power  is,  moreover,  not  completely  lost  sight 
of  by  Smith,  as  is  proved  by  the  following  passages  :  "  The  riches  and,  so  far  as 
power  depends  upon  riches,  the  power  of  every  country  must  always  be  in  pro- 
portion to  the  value  of  its  annual  produce.  .  .  .  But  the  great  object  of  the 
political  economy  of  every  country  is  to  increase  the  riches  and  power  of  that 
country."  (Wealth  of  Nations,  Book  II,  chap.  5  ;  Carman's  edition,  vol.  i,  p.  851.) 

*  On  the  question  of  the  industrial  vocation  of  the  temperate  zone  and  the 
agricultural  vocation  of  the  torrid  compare  National  System,  Book  II,  chap.  4. 


272  FRIEDRICH  LIST 

these  conditions  are  given  then  it  becomes  a  nation's  first  duty  to 
exert  all  its  forces  in  order  to  attain  this  stage.  Germany  possessed 
these  desiderata  to  a  remarkable  degree.  All  that  was  needed  was 
an  extension  of  territory,  and  List  lays  claim  to  Holland  and  Denmark 
as  a  portion  of  Germany,  declaring  that  their  incorporation  would 
be  regarded  even  by  themselves  as  being  both  desirable  and  necessary. 
Accordingly,  he  wished  them  to  enter  the  Confederacy  of  their  own 
free  will.1 

Hence  the  aim  of  a  commercial  policy  is  no  longer  what  it  was  for 
Smith,  viz.  the  enriching  of  a  nation.  It  is  a  much  more  complex 
ideal  that  List  proposes,  both  historically  and  politically,  but  an  ideal 
which  implies  as  a  primary  necessity  the  establishment  of  manu- 
factures. 

(b)  This  necessity  becomes  apparent  from  still  another  point  of 
view.  The  estimate  of  a  nation's  wealth  should  not  be  confined  to  one 
particular  moment.  It  is  not  enough  that  the  labour  and  economy 
of  its  citizens  should  at  the  present  moment  assure  for  it  a  great  mass 
of  exchange  values.  It  is  also  necessary  that  these  resources  of  labour 
and  of  economy  should  be  safeguarded  and  that  their  future  develop- 
ment should  be  assured,  for  "  the  power  of  creating  wealth  is  in- 
finitely more  important  than  the  wealth  itself."  A  nation  should 
concern  itself  with  the  growth  of  what  List  in  a  vague  fashion  calls 
its  productive  forces  even  more  than  with  the  exchange  values 
which  depend  upon  them.*  Even  a  temporary  sacrifice  of  the 
second  may  be  demanded  for  the  sake  of  the  first.  In  these  expres- 
sions List  merely  wishes  to  emphasise  the  distinction  between  a 
policy  which  takes  account  of  a  nation's  future  as  compared  with 
one  which  takes  account  only  of  the  present.  "  A  nation  must 
sacrifice  and  give  up  a  measure  of  material  property  in  order 

1  "  The  German  nation  will  at  once  obtain  what  it  is  now  in  need  of,  namely, 
fisheries  and  naval  power,  maritime  commerce  and  colonies."  (National  System, 
p.  143.)  List  has  no  difficulty  in  allying  his  patriotic  idealism  with  the  practical 
side  of  his  nature. 

1  List  deliberately  distinguishes  between  exchange  values  and  productive 
forces ;  but  the  distinction  is  by  no  means  a  happy  one.  For  a  policy  which 
aims  at  encouraging  productive  forces  has  no  other  way  of  demonstrating  its 
superiority  than  by  showing  an  increase  of  exchange  value.  The  two  notions 
are  not  opposed  to  one  another,  and  in  reckoning  a  nation's  wealth  we  must 
take  some  account  of  its  present  state  as  well  as  of  its  future  resources.  In  his 
Letters  to  Ingersott  (cf.  Letter  IV,  referred  to  above)  he  distinguishes  between 
"  natural  and  intellectual  capital  "  on  the  one  hand  and  "  material  productive 
capital  "  on  the  other  (Adam  Smith's  idea  of  capital).  "  The  productive  powers 
of  the  nation  depend  not  only  upon  the  latter,  but  also  and  chiefly  upon  the 
former." 


LIST  AND  ECONOMIC  CONDITIONS  IN  GERMANY    273 

to  gain  culture,  skill,  and  powers  of  united  production  ;  it  must 
sacrifice  some  present  advantages  in  order  to  ensure  to  itself  future 
ones."  * 

But  what  are  these  productive  forces  which  constitute  the  per- 
manent source  of  a  nation's  prosperity  and  the  condition  of  its 
progress  ? 

With  particular  insistence  List  first  of  all  mentions  the  moral 
and  political  institutions,  freedom  of  thought,  freedom  of  conscience, 
liberty  of  the  press,  trial  by  jury,  publicity  of  justice,  control  of 
administration,  and  parliamentary  government.  All  these  have  a 
stimulating  and  salutary  effect  upon  labour.  He  is  never  weary  of 
recalling  to  mind  the  loss  of  wealth  caused  by  the  Revocation  of  the 
Edict  of  Nantes,  or  by  the  Spanish  Inquisition,  which,  says  he,  '*  had 
passed  sentence  of  death  upon  the  Spanish  navy  long  ere  the  English 
and  the  Dutch  fleets  had  executed  the  decree  "  (p.  88).  He  unjustly  * 
accuses  Smith  and  his  school  of  materialism,  and  condemns  them 
for  neglecting  to  reckon  those  infinitely  powerful  but  perhaps  less 
calculable  forces. 

But  of  all  the  productive  forces  of  a  nation  none,  according  to 
List,  can  equal  manufactures,  for  manufactures  develop  the  moral 
forces  of  a  nation  to  a  superlative  degree.  **  The  spirit  of  striving 

1  National  System,  p.  117. 

1  Unjustly  as  we  think,  for  on  more  than  one  occasion  Smith  did  take 
account  of  moral  forces.  He  dated  the  prosperity  of  English  agriculture  from 
the  time  when  farmers  were  freed  from  their  long  servitude  and  became  hence- 
forth independent  of  the  proprietors.  He  remarks  that  towns  attain  prosperity 
quicker  than  the  country,  because  a  regular  government  is  earlier  established  there. 
"  The  best  effect  which  commerce  and  manufactures  have  is  the  gradual  intro- 
duction and  establishment  of  order  and  good  government,  and  with  them  the 
liberty  and  security  of  individuals  among  the  inhabitants  of  the  country.  This, 
though  it  has  been  the  least  observed,  is  by  far  the  most  important  of  their  effect*. 
Mr.  Hume  is  the  only  writer  who  so  far  as  I  know  has  hitherto  taken  notice  of  it." 
(Book  III,  ohap.  4  ;  Cannan,  voL  i,  p.  383.)  Speaking  of  the  American  colonies, 
Smith  (Cannan,  vol.  ii,  p.  73)  makes  the  remark  that  although  their  fertility  is 
inferior  to  the  Spanish,  Portuguese,  and  the  French  colonies,  "  the  political 
institutions  of  the  English  colonies  have  been  more  favourable  to  the  improve- 
ment and  cultivation  of  this  land  than  those  of  any  of  the  other  three  nations." 
How  could  Lost  have  forgotten  the  celebrated  passage  in  which  Smith  attributes 
the  prosperity  of  Great  Britain  largely  to  its  legal  system,  which  guarantees  to 
each  individual  the  fruits  of  his  toil  and  which  must  be  reckoned  among  the  defini- 
tive achievements  of  the  Revolution  of  1688  ?  "  That  security  which  the  laws  in 
Great  Britain  give  to  every  man  that  he  shall  enjoy  the  fruits  of  his  own  labour  is 
alone  sufficient  to  make  any  country  flourish,  notwithstanding  these  and  twenty 
other  absurd  regulations  of  commerce ;  and  this  security  was  perfected  much 
about  the  same  time  that  the  bounty  was  established."  (Book  IV,  chap.  5; 
Cannan,  vol.  ii,  pp.  42-43.) 


274  FRIEDRICH  LIST 

for  a  steady  increase  in  mental  and  bodily  acquirements,  of  emulation 
and  of  liberty,  characterise  a  State  devoted  to  manufactures  and 
commerce.  ...  In  a  country  devoted  to  mere  raw  agriculture,  dull- 
ness of  mind,  awkwardness  of  body,  obstinate  adherence  to  old 
notions,  customs,  methods,  and  processes,  want  of  culture,  of 
prosperity,  and  of  liberty  prevail."  l  Manufactures  permit  of  a 
better  utilisation  of  a  country's  products  than  is  the  case  even  with 
agriculture.  Its  water-power,  its  winds,  its  minerals,  and  its  fuel 
supplies  are  better  husbanded.  The  presence  of  manufactures  gives 
a  powerful  impetus  to  agriculture,  for  the  agriculturist  profits  even 
more  than  the  manufacturer,  owing  to  the  high  rent,  increased 
profits,  and  better  wages  that  follow  upon  an  increased  demand  for 
agricultural  products.  The  very  proximity  of  manufactures  consti- 
tutes a  kind  of  permanent  market  for  those  agricultural  products, 
a  market  which  neither  war  nor  hostile  tariffs  can  ever  affect.  It 
gives  rise  to  varied  demands  and  allows  of  a  variation  of  cultivation, 
which  results  in  a  regional  division  of  labour.  This  enables  each 
district  to  develop  along  the  most  advantageous  line,  whereas  in 
a  purely  agricultural  country  each  one  has  to  produce  for  his  personal 
consumption,  which  means  the  absence  of  division  of  labour  and  a 
consequent  limitation  of  production.2 

Industry  for  List  is  not  what  it  was  for  Smith.  For  him  it  is 
a  social  force,  the  creator  of  capital  and  of  labour,  and  not  the 
natural  result  of  labour  and  saving.  It  deserves  introduction  even 
at  the  expense  of  a  temporary  loss,  and  its  justification  is  that  of 
all  liberal  institutions,  namely,  the  impetus  given  to  future  produc- 
tion. In  a  beautiful  comparison  which  would  deserve  a  niche  in  a 
book  of  classical  economic  quotations  he  writes  as  follows  :  "  It  is 
true  that  experience  teaches  that  the  wind  bears  the  seed  from  one 
region  to  another,  and  that  thus  waste  moorlands  have  been  trans- 
formed into  dense  forests ;  but  would  it  on  that  account  be  wise 
policy  for  the  forester  to  wait  until  the  wind  in  the  course  of  ages 
effects  this  transformation  ?  "  3  The  tariff,  apparently,  is  the  only 
method  of  raising  the  wind. 

By  placing  himself  at  this  point  of  view  List  is  able  to  defeat 
the  most  powerful  arguments  used  by  his  opponents.  All  we 
can  say  in  reply  is  that  manufactures  will  not  produce  these  effects 
if  they  have  not  already  a  raison  d'etre  in  the  natural  evolution 

1  National  System,  chap.  17,  beginning. 

1  Compare  chapters  7  and  15,  where  he  treats  of  the  manufacturing  industry 
in  ite  relation  to  each  of  the  great  economic  forces  of  the  country. 
«  Ibid.,  p.  87. 


LIST  AND  ECONOMIC  CONDITIONS  IN  GERMANY    275 

of  a  nation — that  is,  if  they  do  not  demand  too  costly  a  sacrifice. 
The  land  on  which  the  settler  sows  his  corn  can  scarcely  be  re- 
garded as  ready  to  receive  it  if  it  lacks  the  power  to  make  it 
grow. 

List's  Protectionism,  as  we  may  guess  from  what  precedes, 
possesses  original  features.  It  is  not  a  universal  remedy  which  may 
be  indifferently  applied  to  every  country  at  any  period  or  to  all  its 
products.  It  is  a  particular  process  which  can  only  be  used  in  certain 
cases  and  under  certain  conditions.  Subjoined  are  some  of  the  cha- 
racteristic traits  of  this  Protectionism  which  List  himself  has  neatly 
described. 

(1)  The  Protectionist  system  can  only  be  justified  when  it  aims 
at  the  industrial  education  of  a  nation.1     It  is  thus  inapplicable  to  a 
nation  like  the  English,  whose  industrial  education  is  already  com- 
plete.    Nor  should  it  be  attempted  by  countries  that  have  neither 
the  aptitude  nor  the  resources  necessary  for  an  industrial  career. 
The  nations  of  the  tropical  zone  seem  destined  to  the  pursuit  of 
agriculture,  while  those  of  the   temperate  zone  are  accustomed  to 
engage  in  many  and  varied  forms  of  production.1 

(2)  But  a  further  justification  is  also  necessary.     It  must  be 
shown  that  the  nation's  progress  is  retarded  by  the  competition  of  a 
powerful  manufacturing  rival  which  has  already  advanced  farther 
on  the  industrial  path.8     "  The  reason  for  this  is  the  same  as  that 
why  a  child  or  a  boy  in  wrestling  with  a  strong  man  can  scarcely 
be  victorious  or  even  offer  steady  resistance."  4    This  was  precisely 
the  case  with  Germany  in  her  struggle  with  England.     (It  is  interest- 
ing to  come  across  a  full  account  of  the  process  of  "  dumping  "  in 
List's  letters  to  Ingersoll.     "  Dumping,"  which  has  received  much 
attention  lately  in  connection  with  the  trust  movement,  consists  in 

1  National  System,  p.  150. 

*  "  It  may  in  general  be  assumed  that  where  any  technical  industry  cannot 
be  established  by  means  of  an  original  protection  of  40  to  60  per  cent.,  and 
cannot  continue  to  maintain  itself  under  a  continued  protection  of  20  to  30 
per  cent.,  the  fundamental  conditions  of  manufacturing  power  are  lacking." 
(Ibid.,  p.  251.) 

'  "  Solely  in  nations  of  the  latter  kind,  namely,  those  which  possess  all  the 
necessary  mental  and  material  conditions  and  means  for  establishing  a  manu- 
facturing power  of  their  own  and  of  thereby  attaining  the  highest  degree  of 
civilisation  and  development  of  material  prosperity  and  political  power,  but  which 
are  retarded  in  their  progress  by  the  competition  of  a  foreign  manufacturing  Power 
which  is  already  farther  advanced  than  their  own — only  in  such  nations  are 
commercial  restrictions  justified  for  the  purpose  of  establishing  and  protecting 
their  own  manufacturing  power."  (Ibid.,  p.  144.) 

4  Md.,  p.  240. 


276  FRIEDBTCH  LIST 

selling  at  a  low  price  in  foreign  markets  in  order  to  keep  up  prices 
in  the  home  market.1) 

(8)  Even  in  that  case  Protection  can  be  justified  "  only  until  that 
manufacturing  Power  is  strong  enough  no  longer  to  have  any  reason  to 
fear  foreign  competition,  and  thenceforth  only  so  far  as  may  be  neces- 
sary for  protecting  the  inland  manufacturing  power  in  its  very  roots." ' 

(4)  Lastly,  Protection  ought  never  to  be  extended  to  agriculture. 
The  reasons  for  this  exception  are  that  on  the  one  hand  agricultural 
prosperity  depends  to  a  great  extent  upon  the  progress  of  manu- 
factures— the  protection  of  the  latter  indirectly  benefits  the  former — 
and  on  the  other  hand  an  increase  in  the  price  of  raw  materials 
or  of  food  would  injure  industry.  Moreover,  there  exists  a  natural 
division  which  is  particularly  advantageous  to  the  system  of  cultiva- 
tion pursued  by  each  country,  a  division  dependent  upon  the  natural 
qualities  of  their  soils,  which  Protection  would  tend  to  destroy.  This 
territorial  division  does  not  exist  for  manufactures,  "  for  the  pursuit 
of  which  every  nation  in  the  temperate  zone  seems  to  have  an  equal 
vocation."  8 

One  might  experience  some  difficulty  in  understanding  the  sudden 

1  "Everyone  knows,"  says  he  (quoted  by  Hirst,  pp.  231  et  seq.),  "that  the 
cost  of  production  of  a  manufactured  good  depends  very  largely  upon  the 
quantity  produced — that  is,  upon  the  operation  of  the  law  of  increasing  returns. 
This  law  exercises  considerable  influence  upon  the  rise  and  fall  of  manufacturing 
power.  .  .  .  An  English  manufacturer  producing  for  the  home  market  has  a 
regular  sale  of  10,000  yards  at  6  dollars  a  yard.  .  .  .  His  expenses  being  thus 
guaranteed  by  his  sales  in  the  home  market,  the  cost  of  producing  a  further 
quantity  of  10,000  yards  for  the  foreign  market  will  be  considerably  reduced 
and  would  yield  him  a  profit  even  were  he  to  sell  for  3  or  4  dollars  a  yard.  And 
even  though  he  should  not  be  making  any  profit  just  then,  he  can  feel  pretty 
confident  about  the  future  when  he  has  ruined  the  foreign  producer  and  driven 
him  out  of  the  field  altogether."  List  thinks  that  this  shows  how  impossible  it 
is  for  manufacturers  in  a  new  country  without  any  measure  of  protection  to 
compete  with  other  countries  whose  industry  is  better  established.  But  this  is 
one  of  the  arguments  that  has  been  most  frequently  used  by  British  manu- 
facturers in  recent  years  in  demanding  protection  against  American  competition. 
We  would  like  to  know  what  List  would  have  thought  of  this. 

1  National  System,  p.  144,  and  the  whole  of  chap.  16  of  Book  II.  He  con- 
sidered that  "  it  would  be  a  further  error  if  France,  after  her  manufacturing 
power  has  become  sufficiently  strong  and  established,  were  not  willing  to  revert 
gradually  to  a  more  moderate  system  of  Protection  and  by  permitting  a  limited 
amount  of  competition  incite  her  manufacturers  to  emulation."  (Ibid.,  p.  249.) 

»  fbid.,  p.  253,  and  especially  p.  162,  etc.,  where  with  a  sudden  change  of  front 
he  declares  himself  in  favour  of  Free  Trade  in  agriculture,  and  employs  the 
arguments  which  Free  Traders  had  applied  to  all  products.  Compare  again  p.  230, 
where  he  declares  that  agriculture  "  by  the  very  nature  of  things  is  sufficiently 
well  protected  against  foreign  competition." 


SOURCES  OF  LIST'S  INSPIRATION  277 

volte- face  of  List  in  favour  of  free  exchange  in  agriculture  did  we 
forget  the  particular  situation  in  Germany,  to  which  his  thoughts 
always  returned.  This  is  equally  true  of  many  other  points  in  his 
system.  Germany  was  an  exporter  of  corn  and  suffered  from  the 
operation  of  the  English  Corn  Laws.  German  agriculture  needed 
no  protection,  but  suffered  from  want  of  markets,  and  List  would 
have  been  very  happy  to  persuade  England  to  abandon  her  Corn 
Laws.  Agricultural  protection  was  only  revived  in  Germany 
towards  the  end  of  1879,  when  the  agriculturists  thought  they  were 
being  threatened  by  foreign  competition. 


II :  SOURCES  OF  LIST'S  INSPIRATION.  HIS  INFLUENCE 
UPON  SUBSEQUENT  PROTECTIONIST  DOCTRINES. 
THE  question  of  the  origin  of  List's  Protectionist  ideas  has  fre- 
quently been  raised.  The  works  of  the  Frenchmen  Dupin  and 
Chaptal  undoubtedly  gave  him  some  material  for  reflection,  but  he 
was  really  confirmed  in  his  opposition  to  laissez-faire  by  the  men 
whom  he  met  in  America.  While  there  he  came  into  intimate  contact 
with  the  members  of  a  society  which  had  been  founded  at  Philadelphia 
for  the  encouragement  of  national  industry.  The  founder  of  this 
society  was  an  American  statesman  named  Hamilton,  the  author 
of  a  celebrated  report  upon  manufactures,  who  as  far  back  as  1791 
had  advocated  the  establishment  of  Protection  for  the  encouragement 
of  struggling  American  industries.1  Hamilton's  argument,  as  List 
fully  recognised,  bears  a  striking  similarity  to  the  thesis  of  the 
National  System.2  The  Philadelphian  society,  which  was  then  pre- 

1  The  authors  were  unable  to  find  a  copy  of  Hamilton's  works  in  France,  but 
according  to  Bastable  (Commerce  of  Nations,  6th  edL,  London,  1912,  pp.  120, 
121)  the  principal  arguments  deduced  by  the  report  to  prove  the  advantages  of 
industry  are  that  it  permits  of  greater  division  of  labour,  prevents  unemploy- 
ment, supplies  a  more  regular  market  than  the  foreign,  and  encourages 
immigration. 

1  It  is  very  probable  that  Lost  had  read  the  work  of  another  American  Pro- 
tectionist, Daniel  Raymond,  whose  Thought*  on  Political  Economy  appeared  in 
1820  and  ran  into  four  editions  (cf.  Daniel  Raymond,  by  Charles  Patrick  Neill, 
Baltimore,  1897).  This  seems  to  be  the  opinion  of  the  majority  of  writers  who 
during  the  last  few  years  have  especially  concerned  themselves  with  the  study 
of  List's  opinions  (Miss  Hirst,  in  her  Life  of  Friedrich  List,  and  M.  Curt  Kohler 
in  his  book  Problematisches  zu  Friedrich  List,  Leipzig,  1909).  But  to  regard 
Raymond  as  his  only  inspirer,  as  is  done  by  Rambaud  in  his  Histoire  des  Doctrines, 
seems  to  us  mere  exaggeration.  Apart  from  the  facts  that  Raymond's  ideas 
are  not  particularly  original  and  that  List  had  lived  some  years  in  America 
in  a  Protectionist  environment,  List  never  quotes  him  at  all.  On  the  other 


278  FRIEDRICH  LIST 

sided  over  by  Matthew  Carey  (the  father  of  the  economist  of  whom 
we  shall  have  to  speak  by  and  by),  immediately  after  List's  arrival 
in  America  inaugurated  an  active  campaign  on  behalf  of  a  revision 
of  the  tariffs.  Ingersoll,  the  vice-president,  persuaded  List  to  join 
in  the  campaign,  which  he  did  by  publishing  in  1827  a  number  of 
letters  which  caused  quite  a  sensation.1  They  are  really  just  a 
rSsumS  of  the  National  System.  The  policy  which  in  the  course  of 
a  few  years  he  was  to  advocate  in  Germany  he  now  recommended 
to  the  consideration  of  the  Americans. 

But  facts  were  even  more  eloquent  than  books,  and  what  chiefly 
struck  the  practical  mind  and  the  observant  eye  of  List  was  the 

hand,  he  frequently  and  enthusiastically  refers  to  both  Dupin  and  Chaptal 
in  his  Letters  to  IngersoU,.  The  expression  "  productive  forces  "  was  probably 
borrowed  from  Baron  Dupin's  Situation  progressive  dei  Force*  de  la  France 
(Paris,  1827),  which  opens  with  the  following  words :  "  This  forms  an  intro- 
duction to  a  work  entitled  The  Productive  and  Commercial  Forces  of  France. 
By  productive  forces  I  mean  the  combined  forces  of  men,  animals,  and  nature 
applied  to  the  work  of  agriculture,  of  industry,  or  of  commerce."  Again,  the 
idea  of  protecting  infant  industries  is  very  neatly  put  by  Chaptal.  On  p.  xlvi 
of  the  introduction  to  his  De  V  Industrie  franyais  (published  in  1819)  we  meet  with 
*  the  following  words  :  "  It  does  not  require  much  reflection  to  be  convinced  of  the 
fact  that  something  more  than  mere  desire  is  needed  to  overcome  the  natural 
obstacles  in  the  way  of  the  development  of  industry.  Everywhere  we  feel  that 
'  infant  industries  '  cannot  struggle  against  older  establishments  cemented  by 
time,  supported  by  much  capital,  freed  from  worry  and  carried  on  by  a  number  of 
trained,  skilled  workmen,  without  having  recourse  to  prohibition  in  order  to  over- 
come the  competition  of  foreign  industries." 

It  is  certain  that  List,  during  his  first  stay  in  France,  had  read  these  two 
authors,  and  had  there  found  a  confirmation  of  his  own  Protectionist  ideas.  It 
is  not  less  certain,  from  a  letter  written  by  him  in  April  1825  (quoted  by  Miss  Hirst, 
p.  33),  that  he  was  converted  before  going  to  America,  but  that  he  expected  to  find 
some  new  arguments  there  which  would  strengthen  him  in  his  opposition  to 
Smith.  Marx's  assertion  made  in  his  Theorien  uber  den  Mehrwerth,  vol.  i,  p.  339 
(published  by  Kautsky,  Stuttgart,  1905),  that  List's  principal  source  of  inspiration 
was  Ferrier  (Du  Gouvernement  considere  dans  tea  Rapports  avec  le  Commerce,  Paris, 
1805)  has  not  the  slightest  foundation.  Neither  has  the  attempt  to  credit  Adam 
Miiller  with  being  the  real  author  of  the  conception  of  a  national  system  of  poli- 
tical economy.  List,  we  know,  was  acquainted  with  Miiller,  a  Catholic  writer 
who  wished  for  the  restoration  of  the  feudal  system.  But  to  be  a  German 
writer  in  the  Germany  of  the  nineteenth  century  was  quite  enough  to  imbue 
one  with  the  idea  of  nationality.  Moreover,  Protectionists'  arguments  are 
extremely  limited  in  number,  so  that  they  do  not  differ  very  much  from  one 
epoch  to  another,  and  it  is  a  comparatively  easy  task  to  find  some  precursors 
of  Friedrich  List. 

1  Published  in  a  volume  entitled  Outlines  of  a  New  System  of  Political  Economy, 
in  a  Series  of  Letters  addressed  by  F.  List  to  Charles  IngersoU  (Philadelphia,  1827). 
This  publication  did  not  find  a  place  in  the  collected  edition  published  by  Hausser, 
but  the  whole  of  it  has  been  incorporated  in  the  interesting  Life  of  Friedrich  List 
by  Margaret  E.  Hirst  (London,  1909). 


SOURCES  OF  LIST'S  INSPIRATION  279 

material  success  of  American  Protection,  just  as  in  Germany  he 
had  been  impressed  by  the  beneficial  effects  which  temporary  Pro- 
tection enforced  by  the  Continental  Blockade  had  produced  there.1 

Far  from  being  injurious  to  the  economic  development  of  the 
United  States,  it  seemed  as  if  Protection  had  really  helped  it.  What 
it  actually  did  was  to  quicken  by  the  space  of  a  few  years  an  evolu- 
tion which  nature  herself  was  one  day  bound  to  accomplish.  So 
vast  was  the  territory,  so  abundant  the  natural  resources,  and  so 
advantageously  were  they  placed  for  the  application  of  human 
energy  that  no  system,  however  defective,  could  long  have  delayed 
the  accumulation  of  wealth.  The  similar  condition  of  Germany 
lent  colour  to  the  belief  that  the  same  experiment  carried  on  under 
similar  circumstances  would  also  succeed  there. 

Accordingly,  List's  work,  though  not  directly  connected  with 
any  known  American  system,  is  the  first  treatise  which  gives  a  clear 
indication  of  the  influence  upon  European  thought  of  the  economic 
experiences  of  the  New  World. 

In  a  beautiful  paragraph  in  the  National  System  List  has  himself 
confessed  to  this.  "  When  afterwards  I  visited  the  United  States, 
I  cast  all  books  aside — they  would  only  have  tended  to  mislead  me. 
The  best  work  on  political  economy  which  one  can  read  in  that 
modern  land  is  actual  life.  There  one  may  see  wildernesses  grow 
into  rich  and  mighty  states  ;  and  progress  which  requires  centuries 
in  Europe  goes  on  there  before  one's  eyes,  viz.  that  from  the  condition 
of  the  mere  hunter  to  the  rearing  of  cattle,  from  that  to  agriculture, 
and  from  the  latter  to  manufactures  and  commerce.  There  one  may 
see  how  rents  increase  by  degrees  from  nothing  to  important  revenues. 
There  the  simple  peasant  knows  practically  far  better  than  the  most 
acute  savants  of  the  Old  World  how  agriculture  and  rents  can  be 
improved ;  he  endeavours  to  attract  manufacturers  and  artificers 
to  his  vicinity.  Nowhere  so  well  as  there  can  one  learn  the  importance 
of  means  of  transport,  and  their  effect  on  the  mental  and  material 
life  of  the  people.  That  book  of  actual  life  I  have  earnestly  and 
diligently  studied,  and  compared  with  the  results  of  my  previous 
studies,  experience,  and  reflections."  2 

Though  from  this  point  of  view  List's  Protectionism  seems 
closely  connected  with  the  most  modern  of  economic  units,  a  still 
closer  tie  links  him  to  the  Mercantilism  of  old.  Nor  did  he  ever 

1  This  was  the  consideration  that  influenced  him  in  adopting  a  Protectionist 
atttiude,  although  hitherto  he  had  regarded  himself  ap  a  disciple  of  Smith  and 
Say.  (Letters  to  IngersoU,  p.  173.) 

1  National  System,  preface,  p.  54. 


280  FRIEDRICH  LIST 

dissemble  his  love  for  the  Mercantilists,  especially  for  Colbert. 
He  accused  Smith  and  Say  of  having  misunderstood  them,  and  he 
declared  that  they  themselves  more  justly  deserved  the  title  of 
Mercantilists  because  of  their  attempt  to  apply  to  whole  nations  a 
very  simple  conception  which  they  had  merely  copied  from  a  mer- 
chant's note-book,  namely,  the  advice  to  buy  in  the  cheapest  and 
sell  in  the  dearest  market.  He  distinguishes  between  two  classes  of 
Mercantilists  according  as  they  are  influenced  by  one  or  other  of 
two  dominating  ideas.  On  the  one  hand  we  have  those  who 
emphasise  the  importance  of  industrial  education,  which  is  the 
dominant  note  in  List's  philosophy.  This  idea  has  quite  taken 
the  place  of  the  older  idea  of  a  favourable  balance  of  trade,  and 
has  been  adopted  by  such  a  Liberal  thinker  as  John  Stuart  Mill, 
whereas  the  other  has  been  definitely  rejected  by  the  science. 
Furthermore,  the  Mercantilism  of  the  seventeenth  century  was 
a  special  instrument  employed  in  the  interests  of  a  permanent 
policy,  which  was  exclusively  national ;  while  List's  Protection, 
according  to  his  own  opinion,  was  merely  a  means  of  leading  nations 
towards  the  possibility  of  union  on  a  footing  of  equality.  It  was  a 
mere  transitory  system,  a  policy  dictated  by  circumstances. 

List's  system  cannot  be  regarded  as  the  inspirer  of  modern  Pro- 
tection, any  more  than  he  himself  can  be  regarded  as  a  direct  descen- 
dant of  the  old  Mercantilists.  Even  in  Germany,  despite  the  great 
literary  success  of  his  work,  its  influence  was  practically  nil,  unless 
we  credit  it  with  the  slight  increase  of  taxation  upon  which  the 
Zollverein  decided  in  1844,  and  couple  with  it  the  Protectionist 
campaign  afterwards  carried  on  by  List  in  the  columns  of  his  news- 
paper.1 But  the  Liberal  reforms  carried  out  by  the  English  Parlia- 
ment under  the  Premiership  of  Peel  were  during  that  very  same 
year  crowned  by  the  abolition  of  the  Corn  Laws.  This  measure 
caused  much  consternation  throughout  Europe,  and  the  confirma- 
tion which  Cobden's  ideas  thus  received  influenced  public  opinion 
a  good  deal  and  gave  a  Liberal  trend  to  the  commercial  policy  of 
Europe  during  the  next  few  years.  The  rSgime  of  commercial  treaties 
inaugurated  by  Napoleon  III  was  an  outcome  of  this  change  of 
feeling. 

Towards  the  end  of  1879  a  vague  kind  of  Protectionism  made  its 
appearance  in  Europe.  Tariff  walls  were  raised,  but  they  never 
seemed  to  be  high  enough.  One  would  like  to  know  whether  these 
new  tariffs,  established  successfully  by  Germany  and  France,  were 
in  any  way  inspired  by  List's  ideas. 

1  The  Zollvereinsblatt,  which  was  published  by  him  towards  the  end  of  1843. 


SOURCES  OF  LIST'S  INSPIRATION  281 

It  does  not  seem  that  they  were.  Neither  of  the  two  countries 
which  have  remained  faithful  to  a  thoroughgoing  Protection  any 
longer,, needs  industrial  education.  Both  of  them  have  long  since 
arrived  at  that  complex  state  which,  according  to  List,  is  necessary 
for  the  full  development  of  their  civilisation  and  the  expansion 
of  their  power.  Germany  and  the  United  States  have  no  longer 
any  cause  to  fear  England.  Their  commercial  fleets  are  numerous, 
their  warships  powerful,  and  their  empires  are  every  day  expanding. 
Were  he  to  return  to  this  world  to-day,  List,  who  so  energetically 
emphasised  the  relative  value  of  the  various  commercial  systems,  and 
the  necessity  of  adapting  one's  method  to  the  changing  conditions  of 
the  times  and  the  character  of  the  nation,  but  always  laid  such 
stress  upon  the  essentially  temporary  character  of  the  tariffs  raised, 
would  perhaps  find  himself  ranged  on  the  side  of  those  who  demand  a 
lowering  of  those  barriers  in  the  interest  of  a  more  liberal  expansion 
of  productive  forces.  Has  he  himself  not  declared  that  "  in  a  few 
years  the  civilised  nations  of  the  world,  through  the  perfection  of 
the  means  of  transport,  through  the  influence  of  material  and  in- 
tellectual ties,  will  be  as  united,  nay,  even  more  closely  knit  together, 
than  were  the  counties  of  England  a  hundred  years  ago  "  ?  x  Even 
the  profound  changes  in  the  international  economic  situation  during 
the  last  sixty  years  fail  to  supply  a  serious  justification  for  the  Pro- 
tectionist policy  of  the  great  commercial  nations,  and  the  essential 
traits  of  this  new  regime  differ  toto  ccelo  from  the  outlines  supplied 
by  List.  Far  from  allowing  agriculture  to  develop  naturally,  there 
has  arisen  the  cry  for  some  protection  for  the  farmer,  which  has 
served  as  a  pretext  for  a  general  reinforcement  of  tariffs  in  a  great 
number  of  cases,  notably  in  France  and  Germany.  The  competition 
of  American  corn  has  hindered  European  agriculture  from  benefiting 
by  the  advancement  of  industry  as  List  had  predicted.  Modern 
tariffs,  involving  as  they  do  the  taxation  of  both  agricultural  and 
industrial  products,  imply  a  conception  of  Protection  entirely  different 
from  List's.  He  would  have  confined  Protection  to  the  most  im- 
portant branches  of  national  production — to  those  industries  from 
which  the  other  and  secondary  branches  receive  their  supplies.  Only 

1  National  System,  p.  230.  We  do  not  by  any  means  imply  that  the  Germany  ol 
List's  day  was  in  greater  need  of  Protection  than  the  Germany  of  to-day.  Indeed, 
if  WR  accept  Chaptal's  view,  we  may  well  deny  this,  for,  writing  in  1819,  he  said 
that  Saxony  occupied  a  place  in  the  front  rank  of  European  nations  in  the  matter 
of  industry.  Speaking  of  Prussia,  he  declared  that  the  industry  of  Aix-la-Chapelle 
alone  was  enough  to  establish  the  fame  of  any  nation  (De  V Industrie  fran^aite, 
vol.  i,  p.  75).  We  must  also  recall  the  fact  that  the  basis  of  the  present  prosperity 
of  Germany  was  laid  under  a  regime  of  much  greater  freedom. 

H.D.  X 


282  FRIEDRICH  LIST 

on  this  ground  would  he  have  justified  exceptional  treatment.1  It  is 
an  essentially  vigorous  conception,  and  what  he  sought  of  Protection 
was  an  energetic  stimulant  and  an  agent  of  progress.  But  a  tariff 
which  indifferently  protects  every  enterprise,  which  no  longer  dis- 
tinguishes between  the  fertilising  and  the  fertilised  industries,  and 
increases  all  prices  at  the  same  time,  can  have  only  one  effect — a  loss 
for  one  producer  and  a  gain  for  another.  Their  relative  positions 
remain  intact.  It  is  no  longer  a  means  of  stimulating  productive 
energy  ;  it  is  merely  a  general  instrument  of  defence  against  foreign 
competition,  and  is  essentially  conservative  and  timorous. 

To  speak  the  truth,  tariff  duties  are  never  of  the  nature  of  an 
application  of  economic  doctrines.  They  are  the  results  of  a  com- 
promise between  powerful  interests  which  often  enough  have  nothing 
in  common  with  the  general  interest,  but  are  determined  by  purely 
political,  financial,  or  electoral  considerations.  Hence  it  is  futile  to 
hope  for  a  trace  of  List's  doctrines  in  the  Protective  tariffs  actually 
in  operation.  His  influence,  if  indeed  it  is  perceptible  anywhere, 
must  be  sought  amid  the  subsidiary  doctrines  which  uphold  them. 

The  only  complete  exposition  of  Protectionism  that  has  been 
given  us  since  List's  is  that  of  Carey,2  the  American  economist. 
Carey  was  at  first  a  Free  Trader,  but  in  1858  became  a  Protectionist, 
and  his  ideas,  which  were  expounded  in  his  great  work  The  Principles 
of  Social  Science,  published  in  1858-59,  bear  a  striking  resemblance 
to  those  of  his  German  predecessor. 

Carey,  like  List,  directs  his  attack  against  the  industrial  pre- 
eminence of  England,  and  substitutes  for  the  ideal  of  international 
division  of  labour  the  ideal  of  independent  nationality,  each  nation 
devoting  itself  to  all  branches  of  economic  activity,  and  thus  evolv- 
ing its  own  individuality.  According  to  him,  Free  Trade  tends  to 
"  establish  one  single  factory  for  the  whole  world,  whither  all  the 
raw  produce  has  to  be  sent  whatever  be  the  cost  of  transport."  3 

1  "  Neither  is  it  at  all  necessary  that  all  branches  of  industry  should  be 
protected  in  the  same  degree.  Only  the  most  important  branches  require  special 
protection,  for  the  working  of  which  much  outlay  of  capital  in  building  and 
management,  much  machinery  and  therefore  much  technical  knowledge,  skill,  and 
experience,  and  many  workmen  are  required,  and  whose  products  belong  to  the 
category  of  the  first  necessaries  of  life  and  consequently  axe  of  the  greatest  im- 
portance as  regards  their  total  value  as  well  as  regards  national  independence 
(as,  for  example,  cotton,  woollen,  and  linen  manufactures,  etc.).  If  these  main 
branches  are  suitably  protected  and  developed,  all  other  less  important  branches 
of  manufacture  will  rise  up  around  them  under  a  less  degree  of  j.roteotion." 
(National  System,  p.  145.) 

a  On  Carey  see  infra.  Book  HI. 

3  Carey,  Principles  of  Social  Science, 


SOURCES  OF  LIST'S  INSPIRATION  283 

The  effect  of  this  system  is  to  hinder  or  retard  the  progress  of  all 
nations  for  the  sake  of  this  one.  But  a  society  waxes  wealthy  and 
strong  only  in  proportion  as  it  helps  in  the  development  of  a  number 
of  productive  associations  wherein  various  -kinds  of  employments 
are  being  pursued,  which  increase  the  demand  for  mutual  services 
and  aid  one  another  by  their  very  proximity.  Such  associations 
alone  are  capable  of  developing  the  latent  faculties  of  man  x  and  of 
increasing  his  hold  upon  nature.  These  two  traits  help  to  define 
economic  progress.  Under  a  slightly  different  form  we  have  a 
picture  of  the  normal  nation  or  the  complex  State  so  dear  to  the 
heart  of  Friedrich  List — an  ideal  of  continuous  progress  as  the 
object  of  commercial  policy  being  substituted  for  one  of  immediate 
enrichment. 

Following  List,  but  in  a  still  more  detailed  fashion,  Carey  sought 
to  show  the  beneficial  effects  that  the  proximity  of  protected  in- 
dustry would  have  upon  agriculture.  But  unfortunately  there  are 
other  arguments  upon  which  Carey  lays  equal  stress  that  are  really 
of  a  much  more  debatable  character. 

Protection,  according  to  Carey,  by  furnishing  a  ready  market  for 
agricultural  products,  would  free  agriculture  from  the  burden  of  an 
exorbitant  cost  of  carriage  to  a  distant  place.  This  argument,  which 
List 2  merely  threw  out  as  a  passing  suggestion,  continually  recurs 
with  the  American  author.  But,  as  Stuart  Mill  justly  remarked,* 
if  America  consents  to  such  expenditure  it  affords  a  proof  that  she 
procures  by  means  of  international  exchange  more  manufactured 
goods  than  if  she  manufactured  them  herself. 

Another  no  less  debatable  point :  The  exportation  of  agricultural 
products,  says  Carey,  exhausts  the  soil,  for  the  products  being  con- 
sumed away  from  the  spot  where  they  are  grown,  the  fertilizing 
agents  which  they  contain  are  not  restored  to  the  earth ;  a  manu- 
facturing population  in  the  immmediate  neighbourhood  *  would 
remedy  this.  But,  as  John  Stuart  Mill  again  remarks,5  and  justly 

1  Carey,  Principles  of  Social  Science. 

1  National  System,  Book  II,  ohap.  3. 

*  Principles  of  Political  Economy,  Book  V,  chap.  10,  §  1. 

1  "  Of  all  the  things  required  for  the  purposes  of  man,  the  one  that  least  bears 
transportation,  and  is,  yet,  of  all  the  most  important,  is  manure.  The  soil  can 
continue  to  produce  on  the  condition,  only,  of  restoring  to  it  the  elements  of 
which  its  crop  had  been  composed.  That  being  complied  with,  the  supply  of 
food  increases,  and  men  are  enabled  to  come  nearer  together  and  combine  their 
efforts — developing  their  individual  faculties,  and  thus  increasing  their  wealth ; 
and  yet  this  condition  of  improvement,  essential  as  it  is,  has  been  overlooked 
by  all  economists."  (Principles  of  Social  Science,  vol.  i,  pp.  273-274.) 

1  Principles  of  Political  Economy,  Book  V,  chap.  10,  §  1. 


284  FRIEDRICH  LIST 

enough,  it  is  not  Free  Trade  that  forces  America  to  export  cereals. 
If  she  does  so,  it  is  because  exhaustion  of  soil  appears  to  her  an 
insignificant  inconvenience  compared  with  the  advantage  gained  by 
exportation. 

Carey,  finally,  was  one  of  the  first  to  discover  in  Protection  a 
means  of  increasing  wages.  Once  the  complex  economic  State  is 
established  there  arises  a  keen  competition  between  the  entrepreneurs 
who  require  the  service  of  labour — a  competition  which  naturally 
benefits  the  workman.  But  this  advantage,  granting  that  it  does 
exist,  is  more  than  counterbalanced  by  the  increased  price  of 
goods. 

We  see  that  Carey,  although  sharing  the  fundamental  concep- 
tions of  List,  employs  arguments  that  are  much  less  valid.  Both  in 
power  of  exposition  and  in  the  scientific  value  of  his  work,  the  German 
author  shows  himself  vastly  superior  to  his  American  successor. 
He  is  also  much  more  moderate.  Carey  is  not  content  with  industrial 
Protection ;  he  demands  agricultural  Protection  as  well,  and  the 
duties,  though  a  little  higher  than  those  proposed  by  List,  seem 
hardly  sufficient  for  him. 

Despite  all  this  similarity  of  views,  Carey  does  not  owe  his 
inspiration  to  List.  He  was  acquainted  with  the  National  System 
and  he  quoted  it.  But  American  economic  literature  had  already 
supplied  him  with  analogous  suggestions.  Even  more  than  books, 
the  economic  life  of  America  itself  as  it  evolved  before  his  very 
eyes  had  contributed  to  the  formation  of  his  ideas.  It  was  the 
progress  of  America  under  a  Protective  regime,  it  was  the  spectacle 
of  a  country  as  yet  entirely  new  and  sparsely  populated,  increasing 
the  produce  of  her  soil  as  colonisation  extended,  and  multiplying  her 
wealth  as  population  became  more  dense,  that  inspired  him  with  the 
idea  of  a  policy  of  isolation  with  a  view  to  hastening  the  utilisation 
of  those  enormous  resources.  More  fortunate  than  List,  he  saw  his 
ideas  accepted,  if  not  by  the  scientific  experts  of  his  country  (who 
on  the  whole  remained  aloof),  at  least  by  the  American  politician, 
who  has  applied  his  principles  rather  freely.1 

Carey's  doctrine,  accordingly,  cannot  be  attributed  directly  to 
the  influence  of  List.  It  remains  to  be  seen  whether  List  had  any 
influence  upon  European  doctrines. 

He  undoubtedly  succeeded  in  forcing  the  acceptance  of  the  idea 
of  a  temporary  Protection  for  infant  industries  even  upon  Free 
Traders.  The  most  notable  convert  to  this  view  was  John  Stuart 

1  On  this  point  see  Jenks,  Henry  G.  Carey  als  Nationalokonom,  chap.  1 
Jena,  1S85); 


SOURCES  OF  LIST'S  INSPIRATION  285 

Mill.1  But  it  was  a  somewhat  Platonic  concession  that  he  made.  He 
thought  it  inapplicable  to  old  countries,  for  their  education  was  no 
longer  incomplete,  and  at  best  useful  only  for  new  countries. 

Can  modern  Protectionists  claim  descent  from  List  ?  In  the 
absence  of  any  systematic  treatise  dealing  with  their  ideas,  it  is  not 
always  easy  to  glean  the  significance  of  their  doctrines  from  the 
various  articles,  discourses,  and  brochures  amid  which  they  are 
scattered.2  Neglecting  those  writers  who  are  merely  content  to 
reproduce  the  old  fallacies  of  the  Mercantile  arguments  concerning 
the  balance  of  trade,3  the  majority  of  them  appear  to  base  their  case 
more  or  less  explicitly  upon  two  principal  arguments:  (1)  the 
necessity  for  economic  autonomy ;  (2)  the  patriotic  necessity  of 
securing  a  national  market  for  national  products.4  These  two 

1  Compare  the  long  passage  in  the  Principles,  Book  V,  chap.  10,  §1,  which 
begins :  "  The  only  case  in  which  on  mere  principles  of  political  economy  protect- 
ing duties  can  be  defensible  is  when  they  are  imposed  temporarily  (especially  in 
a  young  and  rising  nation)  in  hopes  of  naturalising  a  foreign  industry,  in  itself 
perfectly  suitable  to  the  circumstances  of  the  country.  The  superiority  of  one 
country  over  another  in  a  branch  of  production  often  varies  only  from  having 
begun  it  sooner."  Stuart  Mill,  however,  does  not  refer  to  Last,  and  one 
wonders  whether  the  paragraph  owes  anything  to  his  influence. 

1  We  must  make  an  exception  of  M.  Cauwes,  whose  Protectionism,  on  the 
contrary,  is  a  quite  logical  adaptation  of  List's  idea,  viz.  the  superiority  of 
nations  possessing  a  complex  economy.  This  is  the  only  scientific  system  of 
Protection  that  we  are  to-day  acquainted  with.  But  it  must  be  confessed  that 
the  majority  of  writers  are  very  far  removed  from  Cauwes'  point  of  view. 
Compare  his  Coure  d' Economic  politique,  3rd  ed.,  vol.  iii. 

*  Such,  e.g.,  are  the  economists  who  are  always  speaking  of  a  "  commercial 
deficit,"    i.e.  of  an  unfavourable  balance  of  commerce.     Despite  the  frequent 
refutations  which  have  been  given  of  it,  it  is  still  frequently  quoted  as  an  axiomatic 
truth.     List  criticised  the  school  for  ite  complete  indifference  to  the  balance  of 
imports  and  exports.     But  he  did  not  favour  the  Mercantilist    theory  of  the 
balance  of  trade ;    on  the  contrary,  he  regarded  that  as  definitely  condemned 
(p.  21 8).     He  regarded  the  question  from  a  special  point  of  view,  that  of  monetary 
equilibrium.    When  a  nation,  says  he,  imports  much,  but  does  not  export  a  corre- 
sponding amount  of  goods,  it  may  be  forced  to  furnish  payment  in  gold,  and  a 
drainage  of  gold  might  give  rise  to  a  financial  crisis.     The  indifference  of  the  school 
with  regard  to  this  question  of  the  quantity  of  money  is  very  much  exaggerated 
(Book  II,  chap.  13).     The  policy  of  the  great  central  banks  of  to-day  aims  at 
easing  those  tensions  in  the  money  market  which  appear  as  the  result  of  over- 
importation,  and  in  this  matter  they  have  proved  themselves  much  superior  to 
any  system  of  Protection. 

*  Some  writers  go   even  farther.     Patten  (Economic   Foundation*  of  Pro- 
tection  longs  to  see  a  national  type  established  peculiar  to  each  country,  as  the 
result  of  forcing  the  inhabitants  to  be  nourished  and  clothed  according  to  the 
natural  resources  of  the  country  in  which  they  live.    We  should,  as  a  consequence 
of  this,  have  an  American  type  quite  superior  to  any  European  type.     "Then," 
•ays  he,  "  we  should  be  able  to  exercise  a  preponderant  influence  upon  the  fate  of 


286  FRIEDRICH  LIST 

points  of  view,  which  are  more  or  less  clearly  avowed  and  accepted 
as  political  maxims,  would,  if  applied  with  logical  strictness, 
result  in  making  all  external  commerce  useless.  Each  nation  would 
thus  be  reduced  to  using  just  those  resources  with  which  Nature 
had  happened  to  endow  it,  but  it  could  get  little  if  any  of  the  goods 
produced  by  the  rest  of  mankind.  These  two  ideas  were  not 
absolutely  foreign  to  List's  thought,  although  they  never  assumed 
anything  more  than  a  secondary  or  subordinate  character.  He  never 
considered  them  as  the  permanent  supports  of  a  commercial  policy. 
List  frequently  spoke  of  making  a  nation  independent  of  foreign 
markets  by  means  of  industry.  He  considered  that  nation  highest 
which  "  has  cultivated  manufacturing  industry  in  all  its  branches 
within  its  territory  to  the  highest  perfection,  and  whose  territory 
and  agricultural  production  is  large  enough  to  supply  its  manu- 
facturing population  with  the  largest  part  of  the  necessaries  of  life 
and  raw  materials  which  they  require."  But  he  also  recognised  that 
such  advantages  were  exceptional,  and  that  it  would  be  folly  for  a 
nation  to  attempt  to  supply  itself  by  means  of  national  division 
of  labour — that  is,  by  home  production — with  articles  for  the  pro- 
duction of  which  it  is  not  favoured  by  nature,  and  which  it  can 
procure  better  and  cheaper  by  means  of  international  division  of 
labour,  or,  in  other  words,  through  foreign  commerce.  Complete 
autonomy  is  accordingly  an  illusion.  But  we  cannot  deny  that 
some  of  his  expressions  seem  to  give  credit  to  the  false  idea  that  a 
country  which  obtains  a  considerable  portion  of  its  consumption 
goods  from  foreigners  must  be  dependent  upon  those  foreigners.1 
In  fact,  it  is  no  more  dependent  upon  the  foreigner  than  the  foreigner 
is  upon  it.  In  the  case  of  a  buyer  and  seller  who  is  the  dependent 
person  ?  There  is  but  one  instance  in  which  the  expression  is  justified, 
and  that  is  when  a  foreign  country  has  become  the  only  source  of 
supply  for  certain  commodities.  Then  the  buyer  does  become 
dependent,  and  List  rightly  enough  had  in  view  the  manufacturing 
monopoly  enjoyed  by  England — a  monopoly  that  no  longer  exists. 

other  nations  and  could  force  them  to  renounce  their  present  economic  methods 
and  adopt  a  more  highly  developed  social  State."  Until  then  no  foreign  goods 
are  to  enter  the  country.  Here,  as  is  very  frequently  the  case,  Protectionism  ia 
confounded  with  nationalism  or  imperialism. 

1  "  A  merely  agricultural  State  is  an  infinitely  less  perfect  institution  than  an 
agricultural-manufacturing  State.  The  former  is  always  more  or  less  economically 
and  politically  dependent  on  those  foreign  nations  which  take  from  it  agricultural 
products  in  exchange  for  manufactured  goods.  It  cannot  determine  for  itself 
how  much  it  will  produce  :  it  must  wait  and  see  how  much  others  will  buy  from 
It."  (National  System,  p.  146.) 


LIST'S  REAL  ORIGINALITY  287 

He  also  spoke  of  retaining  the  home  market  for  home-made 
goods ;  but  he  thought  that  this  guarantee  would  of  necessity  have 
to  be  limited  to  the  period  when  a  nation  is  seeking  to  create  an 
industry  for  itself :  at  a  later  period  foreign  competition  becomes 
desirable  in  order  to  keep  manufacturers  and  workmen  from  in- 
dolence and  indifference.1 

At  no  period  was  List  anxious  to  make  economic  autonomy  or 
the  preservation  of  the  home  market  the  pivot  of  his  commercial 
policy.  The  creation  of  native  industry  is  the  only  justification  of 
protective  rights,  but  this  is  the  one  point  which  modern  Protec- 
tionists cannot  insist  upon  without  anachronism. 

List  left  no  marked  traces  of  his  influence  either  upon  practical 
politics  or  upon  Protectionist  doctrines.  It  is  in  his  general  views 
that  we  must  seek  the  source  of  his  influence  and  the  reason  for  the 
position  which  he  holds  in  the  history  of  economic  doctrines. 


Ill :    LIST'S  REAL  ORIGINALITY 

LIST'S  method  is  essentially  that  of  the  pioneer.  He  was  the  first 
to  make  systematic  use  of  historical  comparison  as  a  means  of 
demonstration  in  political  economy.  Although  he  can  lay  no  claim 
to  be  the  founder  of  the  method,  still  the  brilliant  use  which  he 
made  of  it  justifies  us  in  classifying  him  as  the  equal,  if  not  the 
superior,  of  those  who  at  the  same  moment  were  attempting  the 
creation  of  the  Historical  school  and  the  transformation  of  history 
into  the  essential  organon  of  economic  research. 

List  also  introduced  new  and  useful  points  of  view  into  economics. 
The  principle  of  free  exchange  as  formulated  by  Smith,  and  especially 
by  Ricardo  and  Say,  was  evidently  too  absolute  and  rested  upon  a 
demonstration  that  was  too  abstract  for  the  ordinary  politician.  If, 
as  List  justly  remarks,  the  practice  of  commercial  nations  has  so 
long  remained  contrary  to  a  doctrine  that  all  economists  regard  as 
admirable,  it  is  not  without  some  just  cause.  As  a  matter  of  fact,  can 
the  statesman  ever  place  himself  outside  of  the  point  of  view  of 
national  interest  of  which  he  is  the  custodian  ?  It  is  not  enough  for 
him  to  know  that  the  interchange  of  products  will  in  some  degree 

1  "  A  nation  which  has  already  attained  manufacturing  supremacy  can  only 
protect  its  own  manufactures  and  merchants  against  retrogression  and  indol- 
ence by  the  free  importation  of  means  of  subsistence  and  raw  materials,  and 
by  the  competition  of  foreign  manufactured  goods."  (National  System,  p.  153.) 
Hence  the  appeal  to  England  in  the  name  of  this  theory  to  abolish  her  tariffs, 
but  to  gracefully  allow  France,  Germany,  and  the  United  States  to  continue 
theirs. 


increase  wealth.1  He  must  be  certain  that  this  increased  wealth 
will  benefit  his  own  nation.  He  must  be  equally  well  assured  that 
Free  Trade  will  not  result  in  too  sudden  a  displacement  of  population 
or  industry,  the  social  and  political  results  of  which  might  be  very 
harmful.  In  other  words,  political  economy  must  be  subordinated 
to  politics  in  general,  and  to-day  there  is  no  single  economist  who 
does  not  recognise  the  impossibility  of  separating  them  in  practice.2 
There  is  none  that  does  not  perceive  the  influence  of  political  power 
on  economic  prosperity,and  that  consequently  does  not  recognise  the 
necessity  for  the  different  complexion  which  the  peculiar  circum- 
stances of  each  country  imposes  upon  the  practical  application  of 
the  principle  of  commercial  liberty. 

This  is  not  all.  List  by  abandoning  the  favourite  habit  of 
eighteenth-century  writers  who  contrasted  man  and  society,  and  by 
giving  us  a  picture  of  man  as  he  really  is,  as  a  member  of  a  nation, 
has  introduced  a  fruitful  conception  into  economics  of  which  we 
have  not  yet  seen  the  full  results.  He  rightly  treats  of  nations  not 
merely  as  moral  and  political  associations  created  by  history,  but 
also  as  economic  associations.  Just  as  a  nation  is  politically 
strengthened  by  the  moral  cohesion  of  its  citizens,  so  its  economic 
cohesion  increases  the  productive  energy  of  each  individual  and 
enhances  the  prosperity  of  the  whole  nation. 

And  Governments,  while  charged  with  maintaining  the  political 
unity  of  a  country,  ought  also  to  retain  its  economic  unity  by  sub- 
ordinating all  local  interests  to  the  general  interest,  by  preserving 
intact  the  liberty  of  internal  trade,  by  organising  railways  and  canals 
on  a  national  basis,  by  keeping  watch  over  the  central  bank,  and  by 
aiming  at  a  uniform  code  of  commercial  legislation.  This  was  the 
programme  outlined  by  List  in  his  paper  the  Zollvereinsblatt. 

This  belief  in  the  power  which  a  unified  economic  organisation 
can  bring  to  a  nation  is  by  no  means  too  common  among  individual- 
ists, who  at  bottom  are  often  parti cularists.  But  List  possessed  it  in 
the  highest  degree.  He  devoted  many  years  of  his  life  to  advocating 

1  See  M.  Pareto's  Economia  Politica  (Milan,  1906)  for  a  demonstration  that 
international  exchange  is  not  necessarily  advantageous  for  both  parties  (chap.  9, 
§45). 

1  But  the  line  is  sometimes  difficult  to  follow.  Latterly  statesmen  have  been 
concerned  not  so  much  with  the  exportation  of  goods  as  with  the  migration 
of  capital.  Ought  the  Minister  for  Foreign  Affairs  to  veto  the  raising  of  a  loan 
in  the  home  market  on  behalf  of  a  foreign  Power  or  an  alien  company  ?  To  what 
extent  ought  bankers  and  capitalists  to  accept  his  advice  ?  Such  are  some  of  the 
questions  that  for  some  years  past  have  been  repeatedly  asked  in  France,  England, 
and  Germany.  And  it  seems  in  almost  every  case  that  political  economy  has 
had  to  bow  before  political  necessity,  and  not  vice  versa. 


LIST'S  REAL  ORIGINALITY  289 

the  establishment  of  a  German  railway  system,  and  it  was  he  who 
traced  the  principal  highways  which  have  since  been  established 
in  Germany.  Protection,  in  his  opinion,  was  one  means  of  increasing 
the  economic  cohesion  of  Germany,  because  of  the  solidarity  of 
interests  which  would  result  from  the  presence  of  a  powerful  industry. 

With  similar  enthusiasm  he  devoted  himself  to  two  apparently 
contradictory  tasks — the  suppression  of  inter-State  duties  and  the 
establishment  of  protective  rights.  To  him  there  was  no  element 
of  contradiction  in  this,  any  more  than  there  would  be  for  us  in  a 
national  system  of  political  economy  with  no  protective  rights.1 

He  also  extended  the  political  horizon  of  the  Classical  school  and 
substituted  a  dynamic  for  their  purely  static  conception  of  national 
development.  His  thorough  examination  of  the  conditions  of 
economic  progress  is  a  contribution  to  the  study  of  international 
trade  exactly  analogous  to  the  contribution  made  by  Sismondi  to 
the  study  of  national  welfare.  But,  unlike  Sismondi,  who  wished  to 
retard  this  progress,  he  is  anxious  to  stimulate  it,  and  so  he  charges 
the  State  with  the  duty  of  safeguarding  the  future  prosperity  of  the 
country  and  with  furthering  its  production.  The  actual  procedure, 
involving  as  it  did  the  establishment  of  protective  rights,  may 
appear  to  us  to  be  unfortunate.2  But  the  idea  which  inspires  it — the 
recognition  that  in  the  interests  of  the  future  national  power  has  a 
definitely  economic  role — is  essentially  sound.  To-day  it  is  a  mere 
commonplace,  but  when  List  enunciated  it  it  was  quite  a  novel 
idea. 

In  attempting  to  define  List's  real  significance  one  feels  that 

1  It  is  very  remarkable  that  List's  greatest  admirer,  Diihring,  in  his  Kritische 
Oeachichte  der  Nationalokonomie  und  de«  Sozialismus  (2nd  ed.,  p.  362),  insists  on 
the  fact  that  Protection  is  not  an  essential  element,  but  a  mere  temporary  form 
of  the  principle  of  national  economic  solidarity,  which  is  List's  fundamental  con- 
ception, and  which  must  survive  all  forma  of  Protection.  Diihring  is  the  only 
real  successor  of  List  and  Carey.  He  has  developed  their  ideas  with  a  great 
deal  of  ability  and  has  shown  himself  a  really  scientific  thinker.  But  what 
he  chiefly  admires  in  both  writers  is  not  their  Protection,  but  their  effort  to  lay 
hold  of  the  material  and  moral  forces  which  lie  below  the  mere  fact  of  exchange, 
and  upon  which  a  nation's  prosperity  really  depends.  His  Kursus  der  National- 
und  Sozial-oekonomic  (Berlin,  1873)  is  very  interesting  reading. 

*  Except  the  Saint-Si  monians  nobody  seems  to  have  conceived  of  the  State's 
responsibility  for  a  nation's  productive  forces.  List  refers  to  them  sympathetic  • 
ally,  especially  to  those  who,  like  Michel  Chevalier,  "  sought  to  discover  the  con- 
nection of  these  doctrines  with  those  of  the  premier  schools,  and  to  make  their 
ideas  compatible  with  existing  circumstances  "  (National  System,  p.  287).  But 
List  differs  from  them  in  his  love  of  individual  liberty  and  in  the  importance 
which  he  attaches  to  moral,  political,  and  intellectual  liberty  as  elements  of 
productive  efficiency. 


290       PROUDHON  AND  THE  SOCIALISM  OF  1848 

he  failed  in  the  achievement  of  his  chief  aim.  He  has  not  succeeded 
in  breaking  down  the  abstract  theory  of  international  trade.  On 
the  other  hand,  he  did  make  a  real  contribution  to  economic  science, 
a  contribution  which  the  whole  of  the  nineteenth  century  seemed 
bent  upon  emphasising,  namely,  that  the  Classical  writers  had  been 
too  ready  to  draw  universal  conclusions  from  their  doctrines,  forget- 
ting that  in  economics  it  is  never  safe  to  pass  from  pure  theory  to 
practical  applications  without  taking  account  of  the  intermediate 
links  and  making  allowance  for  change  of  time  arid  place — considera- 
tions which  abstract  theory  rightly  avoids.  List's  merit  lies  in  his 
having  emphasised  this  truth,  especially  in  the  region  of  international 
trade,  and  in  his  doing  it  just  at  that  particular  moment. 


CHAPTER  V:  PROUDHON  AND  THE 
SOCIALISM  OF  1848 

PROUDHON  comes  next,  though  his  place  in  the  history  of  economic 
doctrines  is  not  easily  defined.  Like  all  socialists  he  begins  with  a 
criticism  of  the  rights  of  property.  The  economists  had  carefully 
avoided  discussing  them,  and  political  economy  had  become  a  mere 
resumt  of  the  results  of  private  property.  Proudhon  regarded  these 
rights  as  the  very  basis  of  the  present  social  system  and  the  real 
cause  of  every  injustice.  Accordingly  he  starts  with  a  criticism  of 
property  in  opposition  to  the  economists  who  defended  it. 

But  how  can  we  reform  the  present  system  or  replace  it  by  a 
better  ?  Herein  lies  the  difficulty.  Born  twenty  years  earlier, 
Proudhon,  like  many  others,  would  perhaps  have  invented  a  Utopia. 
But  what  was  possible  in  1820  was  no  longer  so  twenty  years  later. 
Public  opinion  was  already  satiated  with  schemes  of  reform.  Owen, 
Saint-Simon,  Fourier,  Cabet,  and  Louis  Blanc  had  each  in  his  turn 
proposed  a  remedy.  The  fancy  of  reformers  had  roamed  at  will 
over  the  whole  wide  expanse  of  possible  reforms.  Proudhon  was 
well  acquainted  with  all  these  efforts,  and  had  come  to  the  conclusion 
that  they  were  all  equally  useless.  Hence  he  turns  out  to  be  a  critic 
of  the  socialists  as  well  as  of  the  economists. 

Proudhon  attempts  the  correction  of  the  vices  of  private  property 
without  becoming  a  party  to  what  he  calls  the  "  crass  stupidity  of 
socialism."  Every  Utopian  scheme  is  instinctively  rejected.  He 
cares  nothing  for  those  who  view  society  as  they  do  machinery  and 
think  that  an  ingenious  trick  is  all  that  is  needed  to  correct  all 


PRIVATE  PROPERTY  AND  SOCIALISM  291 

anomalies  and  to  reset  the  machine  in  motion.  To  him  social  life 
means  perpetual  progress.1  He  knows  that  time  is  required  for  the 
conciliation  of  those  social  forces  that  are  warring  against  one  another. 
He  was  engrossed  with  his  attempt  to  find  a  solution  for  this  difficult 
problem  when  the  Revolution  of  1848  broke  out,  and  Proudhon, 
suddenly  thrown  into  action,  finds  himself  forced  to  express  his 
ideas  in  a  concrete  form,  such  that  all  could  understand.  The  critic 
has  to  try  his  hand  at  construction,  and  almost  despite  himself  he 
outlines  another  Utopia  in  his  Exchange  Bank. 

Other  writers  had  sought  a  solution  in  the  complete  overthrow  of 
the  present  methods  of  production  and  distribution.  But  Proudhon 
thought  it  lay  in  improved  circulation.  It  was  an  ingenious  idea,  and 
it  deserves  mention  in  a  history  of  economic  doctrines  because  of 
the  truth,  mingled  with  error,  which  it  contains,  and  because  it 
has  become  the  type  of  a  series  of  similar  projects.  It  is  upon  this 
conception  that  we  wish  to  dilate  here.  Leaving  aside  his  other 
ideas,  which  are  no  whit  less  interesting,  we  shall  treat  of  Proudhon 
the  philosopher,  moralist,  and  political  theorist  only  in  so  far  as  these 
have  influenced  Proudhon  the  economist.* 


I :   CRITICISM  OF  PRIVATE  PROPERTY  AND  SOCIALISM 

THE  work  that  first  brought  Proudhon  to  the  notice  of  the  public 
was  a  book  published  in  1840  entitled  Qu'est-ce  que  la  Proprittt  f 
Proudhon  was  then  thirty-one  years  of  age.3  Born  at  Besancon,  he 

1  Philosophic  du  Progris,  (Euvres,  vol.  xx,  p.  19 :  "  Growth  is  essential  to 
thought,  and  truth  or  reality  whether  in  nature  or  in  human  affairs  is  essentially 
historical,  at  one  time  advancing,  at  another  receding,  evolving  slowly,  but  always 
undergoing  some  change."  In  his  Contradictions  economiques  he  defines  social 
science  as  "  the  systems  tised  study  of  society,  not  merely  as  it  was  in  the  past 
or  will  be  in  the  future,  but  as  it  Is  in  the  present  in  all  its  manifold  appearances, 
for  only  by  looking  at  the  whole  of  its  activities  can  we  hope  to  discover  intelli- 
gence and  order."  (Vol.  i,  p.  43.)  "  If  we  apply  this  conception  to  the  organisa- 
tion of  labour  we  cannot  agree  with  the  economists  when  they  say  that  it  is 
already  completely  organised,  or  with  the  socialists  when  they  declare  that  it 
must  be  organised,  but  simply  that  it  is  gradually  organising  itself  ;  that  is,  that 
the  process  of  organisation  has  gone  on  since  time  immemorial  and  is  still  going 
on,  and  that  it  will  continue  to  go  on.  Science  should  always  be  on  the  look-out 
for  the  results  that  have  already  been  achieved  or  are  on  the  point  of  realisation." 
(Vol.  i,  p.  45.) 

*  A  vigorous  exposition  of  his  other  ideas  is  given  in  Bougie's  La  Sociologie 
df  Proudhon  (Paris,  1911). 

1  The  following  are  Proudhon's  principal  works:  1840,  Qu'at-ce  que  la 
Propriett  ?  (studies  in  ethics  and  politics) ;  1846,  Systlmt  dea  Contradictions 
iconomiquu  (the  "  philosophy  of  destitution  ") ;  1848,  Organisation  du  Cridit  et 
d€  la  Circulation  et  Solution  du  Probteme  tocial ;  1848,  Rkuml  de  la  Question 


292       PROUDHON  AND  THE  SOCIALISM  OF  1848 

was  the  son  of  a  brewer,1  and  was  forced  to  earn  his  living  at  an  early 
age.  He  first  became  a  proof-corrector,  and  then  set  up  as  a  printer 
on  his  own  account.  Despite  hard  work  he  became  a  diligent  reader, 
his  only  guide  being  his  insatiable  thirst  for  knowledge.  The  sight 
of  social  injustice  had  sent  the  iron  into  his  soul.  Economic  questions 
were  faced  with  all  the  ardour  of  youth,  with  all  the  enthusiasm  of 
a  man  of  the  people  speaking  on  bshalf  of  his  brothers,  and  with  all 
the  confidence  of  one  who  believes  in  the  convincing  force  of  logic 
and  common  sense.  All  this  is  very  evident  in  his  brilliantly  imagina- 
tive work.  Mingled  with  it  is  a  good  deal  of  that  provoking  swagger 
which  was  noted  by  Sainte-Beuve  as  one  of  his  characteristics,  and 
which  appears  in  all  his  writings. 

Throughout  this  treatise  from  first  page  to  last  there  periodically 
flashes  one  telling  phrase  which  sums  up  bis  whole  argument, 
"  Property  is  theft."  » 

gociale,  Banque  d1  fichange ;  1849,  Lea  Confessions  d'un  Revolutionnaire ',  1850, 
Interet  et  Principal  (a  discussion  between  M.  Bastiat  and  M.  Proudhon) ;  1858, 
De  la  Justice  dans  la  Revolution  et  dans  VEglise  (three  volumes) ;  1861,  La  Qutrrt 
et  la  Paix  ;  1865,  De  la  C apatite  politique  des  Classes  ouvrieres.  Our  quotations 
are  taken  from  the  (Euvres  completes,  published  in  twenty -six  volumes  by  Lacroix 
(1867-70). 

1  "  Do  you  happen  to  know,  madam,  what  my  father  was  ?  Well,  he  was  just 
an  honest  brewer  whom  you  could  never  persuade  to  make  money  by  selling 
above  cost  price.  Such  gains,  he  thought,  were  immoral.  '  My  beer,'  he  would 
always  remark,  'costs  me  so  much,  including  my  salary.  I  cannot  sell  it  for  more.' 
What  was  the  result  ?  My  dear  father  always  lived  in  poverty  and  died  a  poor 
man,  leaving  poor  children  behind  him."  (Letter  to  Madame  d'Agoult,  Corre- 
tpondance,  vol.  ii,  p.  239.) 

1  It  has  been  said  that  Proudhon  borrowed  this  formula  from  Brissot  de 
Warville,  the  author  of  a  work  entitled  Recherches  philosophiques  sur  le  Droit 
de  Propriety  et  sur  le  Vol,  consider  is  dans  la  Nature  et  dans  la  Societe.  It  was 
first  published  in  1780,  and  reappeared  with  some  modifications  in  vol.  vi, 
pp.  261  et  seq.,  of  his  Bibliotheque  philosophique  du  Legislateur  (1782).  But 
this  is  a  mistake.  Proudhon  declares  that  the  work  was  unknown  to  him  (Justice, 
vol.  i,  p.  301) ;  and,  moreover,  the  formula  is  not  there  at  all.  Brissot's  point  of 
view  ia  entirely  different  from  Proudhon's.  The  former  believes  that  in  a  state 
of  nature  the  right  of  property  is  simply  the  outcome  of  want,  and  disappears 
when  that  want  is  satisfied ;  that  man,  and  even  animals  and  plants,  has  a 
right  to  everything  that  can  satisfy  his  wants,  but  that  the  right  disappears 
with  the  satisfaction  of  the  want.  Consequently  theft  perpetrated  under  the 
pressure  of  want  simply  means  a  return  to  nature.  The  rich  are  really  the 
thieves,  because  they  refuse  to  the  culprit  the  lawful  satisfaction  of  his  needs. 
The  result  is  a  plea  for  a  more  lenient  treatment  of  thieves.  But  Brissot  is  very 
careful  not  to  attack  civil  property,  which  is  indispensable  for  the  growth  of 
wealth  and  the  expansion  of  commerce,  although  it  has  no  foundation  in  a 
natural  right  (p.  333).  There  is  no  mention  of  unearned  income.  Proudhon,  on  the 
other  hand,  never  even  discusses  the  question  as  to  whether  property  is  based 
upon  want  or  not.  He  would  certainly  have  referred  to  this  if  he  had  read  Brissot. 


PRIVATE  PROPERTY  AND  SOCIALISM  293 

The  question  then  arises  as  to  whether  Proudhon  regards  all 
property  as  theft.  Does  he  condemn  appropriation,  or  is  it  the  mere 
fact  of  possession  that  he  is  inveighing  against  ?  This  is  how  the 
public  at  large  have  viewed  it,  and  it  would  be  useless  to  deny  that 
Proudhon  owes  a  great  deal  to  this  interpretation,  and  the  consequent 
consternation  of  the  bourgeoisie.  But  his  meaning  is  quite  different. 
Private  property  in  the  sense  of  the  free  disposal  of  the  fruits  of 
labour  and  saving  is  in  his  opinion  of  the  very  essence  of  liberty.  At 
bottom  this  is  nothing  more  than  man's  control  over  himself.1  But 
why  attack  property,  then  ?  Property  is  attacked  because  it  gives 
to  the  proprietor  a  right  to  an  income  for  which  he  has  not  worked. 
It  is  not  property  as  such,  but  the  right  of  escheat,  that  forms  the 
butt  of  Proudhon's  attack ;  and  following  the  lead  of  Owen  and  other 
English  socialists,  as  well  as  the  Saint-Simonians,  he  directs  his  charges 
against  that  right  of  escheat  which,  according  to  circumstances  and 
the  character  of  the  revenue,  is  variously  known  as  rent,  discount, 
money  interest,  agricultural  privilege,  sinecure,  etc.2 

Like  every  socialist,  Proudhon  considered  that  labour  alone  was 
productive.8  Land  and  capital  without  labour  were  useless.  Hence 
the  demand  of  the  proprietor  for  a  share  of  the  produce  as  a  return 
for  the  service  which  his  capital  has  yielded  is  radically  false.  It 
is  based  upon  the  supposition  that  capital  by  itself  is  productive, 
whereas  the  capitalist  in  taking  payment  for  it  literally  receives 
something  for  nothing.4 

1  Contradictions,  vol.  i,  pp.  219,  221. 

1  Resume  de  la  Question  sociale,  p.  29.  We  meet  with  the  same  idea  in  other 
passages.  "  Property  under  the  influence  of  division  of  labour  has  become  a  mere 
link  in  the  chain  of  circulation,  and  the  proprietor  himself  a  kind  of  toll-gatherer 
who  demands  a  toll  from  every  commodity  that  passes  his  way.  Property  is  the 
real  thief."  (Banque  d'Schange,  p.  166.)  We  must  also  remember  that  Proudhon 
did  not  consider  that  taking  interest  was  always  illegal.  In  the  controversy 
with  Bastiat  he  admits  that  it  was  necessary  in  the  past,  but  that  he  has  found 
a  way  of  getting  rid  of  it  altogether. 

1  We  must  distinguish  between  this  and  Marx's  doctrine.  Marx  believed  that 
all  value  is  the  product  of  labour.  Proudhon  refuses  to  admit  this.  He  thinks 
that  value  should  in  some  way  correspond  to  the  quantity  of  labour,  but  that 
this  is  not  the  case  in  present-day  society.  Marx  wag  quite  aware  of  the  fact  that 
Proudhon  did  not  share  his  views  (see  Misere  de  la  Philosophic).  Proudhon 
follows  Rodbertus,  who  taught  that  the  products  only  and  not  their  values  are 
provided  by  labour. 

•  Propriete,  ler  Memoire,  pp.  131-132.  It  is  true  that  Proudhon  adds  that 
without  land  and  capital  labour  would  be  unproductive.  But  he  soon  forgets 
his  qualifications  when  he  proceeds  to  draw  conclusions,  especially  when  he 
comes  to  give  an  exposition  of  the  Exchange  Bank,  where  we  meet  with  the 
following  sentence :  "  Society  is  built  up  as  follows :  All  the  raw  material  required 
is  gratuitously  supplied  by  nature,  so  that  in  the  economic  world  every  product 


294        PROUDHON  AND  THE  SOCIALISM  OF  1848 

All  this  is  simply  theft.  His  own  definition  of  property  is,  "  The 
right  to  enjoy  the  fruits  of  industry,  or  of  the  labour  of  others,  or  to 
dispose  of  those  fruits  to  others  by  will."  1 

The  theme  is  not  new,  and  the  line  of  thought  will  be  re- 
sumed— by  Rodbertus  among  others.  The  originality  of  the  work 
consists  not  so  much  in  the  idea  as  in  the  brilliance  of  the  exposition, 
the  vehemence  of  the  style,  and  the  verve  of  the  polemics  hurled 
against  the  old  arguments  which  based  property  upon  labour,  upon 
natural  right,  or  upon  occupation.'  A  German  writer  a  has  said  that, 
published  in  Germany  or  in  England,  the  book  would  have  passed 
unnoticed,  because  in  both  those  countries  the  defence  of  property 
had  been  much  more  scientific  than  in  France.3 

The  whole  force  of  the  work  lies,  not  in  itself,  but  in  the  weakness 
of  the  opposing  arguments,  and  this  fact  is  quite  sufficient  to  give  it 
a  certain  permanent  value.  The  treatise  sent  an  echo  through  the 
whole  world,  and  its  author  may  be  said  to  have  done  for  French 
socialism  what  Lassalle  did  for  German.  The  ideas  set  forth  are  not 
new,  but  they  are  expressed  in  phrases  of  wonderful  penetration. 

There  is  also  a  wealth  of  ingenious  remarks,  which,  if  not, 
perhaps,  true,  deserve  retention  because  of  their  originality.  How 
such  spoliation  on  the  part  of  capitalists  and  proprietors  can  continue 
without  a  revolt  of  the  working  men  is  a  question  which  has  been 
asked  by  every  writer  on  theoretical  socialism,  without  its  full  import 
ever  being  realised.  Is  there  not  something  very  improbable  in  this  ? 
The  problem  is  a  curious  one,  indeed,  and  requires  much  ingenuity 
for  its  solution.  Marx  disposed  of  it  by  his  theory  of  surplus  value. 
Rodbertus  in  a  simpler  fashion  showed  the  opposition  between 
economic  distribution  as  realised  in  exchange  and  the  social  distribu- 

ifl  really  begot  of  labour,  and  capital  must  be  considered  unproductive."  Else- 
where he  writes  j  "  To  work  is  not  necessarily  to  produce  anything."  (Solution 
du  Problime.  social,  CEuvres,  vol.  vi,  pp.  361  et  seq.,  and  p.  187.) 

1  Propri&i,  ler  Mkmoire,  p.  133. 

1  L.  von  Stein,  Oeschichte  der  sozialen  Bewtgung  in  Frankreich,  vol.  iii,  p.  362 
(Leipzig,  1850).  A  remarkable  piece  of  work  altogether. 

•  It  is  true  that  Proudhon's  attack  is  entirely  directed  against  the  ethics  of 
private  property.  He  shows  how  every  justification  that  is  usually  offered,  such 
as  right  of  occupation,  natural  right,  or  labour,  cannot  justify  the  institution  as 
it  is  to-day.  Private  property  as  we  know  it  is  confined  to  the  few,  whereas 
on  these  principles  it  ought  to  be  widely  diffused.  Criticism  of  this  kind  is  not 
very  difficult,  perhaps,  but  it  does  nothing  to  weaken  the  arguments  of  those 
who  would  justify  property  on  the  grounds  of  social  utility.  The  criticism  of  the 
Saint-Simonians,  who  approach  it  from  the  point  of  view  of  utility  and  productive- 
ness rather  than  from  the  ethical  standpoint,  seems  to  be  much  more  profound. 
This  is  why  we  have  regarded  them  as  the  critics  of  private  property. 


PRIVATE  PROPERTY  AND  SOCIALISM  295 

tion  which  lurks  behind  it.  Proudhon  has  his  own  solution.  There 
is,  says  he,  between  master  and  men  continual  miscalculation.1 
The  master  pays  each  workman  in  proportion  to  the  value  of  his 
own  individual  labour,  but  reserves  for  himself  the  product  which 
results  from  the  collective  force  of  all — a  product  which  is  altogether 
superior  to  that  yielded  by  the  sum  of  their  individual  efforts.  This 
excessive  product  represents  profits.  "  It  is  said  that  the  capitalist 
pays  his  workmen  by  the  day.  But  to  be  more  exact  we  ought  to 
say  that  he  pays  a  per  diem  wage  multiplied  by  the  number  of 
workmen  employed  each  day — which  is  not  the  same  thing.  For 
that  immense  force  which  results  from  union  and  from  the  harmonious 
combination  of  simultaneous  efforts  he  has  paid  nothing.  Two 
hundred  grenadiers  can  deck  the  base  of  the  Louqsor  statue  in  a  few 
hours,  a  task  which  would  be  quite  impossible  for  one  man  though 
he  worked  two  hundred  days.  According  to  the  capitalist  reckoning 
the  wages  paid  in  both  cases  would  be  the  same."  2  "  And  so  the 
worker  is  led  to  believe  that  he  is  paid  for  his  work,  whereas  in 
reality  he  is  only  partly  paid  for  it.  Even  after  receiving  his  wage 
he  still  retains  a  right  of  property  in  the  things  which  he  has  pro- 
duced." 8  His  explanation,  though  very  subtle,  is  none  the  less 
erroneous. 

The  appearance  of  the  pamphlet  made  Proudhon  famous,  not 
merely  in  the  eyes  of  the  public,  who  knew  little  of  him  beyond  his 
famous  formula,  but  also  in  the  opinion  of  the  economists.  Blanqui 
and  Gamier,  among  others,  interested  themselves  in  his  work.  **  It 
is  impossible  to  have  a  higher  opinion  of  anyone  than  I  have  of 
you,"  writes  the  former.4  Blanqui  by  his  favourable  report  to  the 
Academy  of  Moral  Sciences  was  instrumental  in  thwarting  the 
legal  proceedings  which  the  Minister  of  the  Interior  was  anxious 
to  take  against  Proudhon.  And  it  was  upon  Garnier's  advice  that 
the  publisher  Guillaumin,  although  a  strong  adherent  of  orthodox 
economics,  consented  to  issue  a  new  work  by  Proudhon  in  1846. 
The  book  was  entitled  Les  Contradictions  6conomiques,  and  Guillaumin 
was  not  a  little  startled  by  it.6 

1  "This  is  the  fundamental  idea  of  my  first  Mbnoire."  (Quoted  by  Sainte- 
Beuve,  P.  J.  Proudhon,  p.  90.)  Later  on  he  complains  that  the  suggestion  was 
never  even  discussed. 

1  Propri&e,  ler  M&moire,  p.  94. 

1  Ibid.,  p.  91. 

•  Blanqui's  letter  dated  May  1,  1841,  in  reply  to  a  communication  from 
I'roudhon  concerning  the  second  Mimoire  on  property. 

1  Cf.  Sainte-Beuve,  P.  J.  Proudhon,  pp.  202,  203 ;  and  see  on  this  point 
Proudhon's  amusing  letters  to  Guillaumin  (Correspondance,  vol.  ii). 


296       PROUDHON  AND  THE  SOCIALISM  OF  1848 

The  sympathy  of  the  economists  is  easily  explained.  They 
realised  from  the  first  that  Proudhon  was  a  vigorous  opponent  of 
their  views,  but  it  was  not  long  before  they  discovered  that  he 
was  an  equally  resolute  critic  of  socialism.  Let  us  briefly  examine 
his  attitude  with  regard  to  the  latter. 

No  one  has  ever  referred  to  socialists  in  harsher  terms.  "  The 
Saint-Simonians  have  vanished  like  a  masquerade."  1  "  Fourier's 
system  is  the  greatest  mystification  of  our  time."8  To  the  com- 
munists he  writes  as  follows  :  "  Hence,  communists  !  Your  presence 
is  a  stench  in  my  nostrils  and  the  sight  of  you  disgusts  me."  Else- 
where he  says  :  "  Socialism  is  a  mere  nothing.  It  never  has  been 
and  never  will  be  anything.''  *  The  violence  of  his  attitude  towards 
his  predecessors  springs  from  a  fear  of  being  confused  with  them. 
The  procedure  is  intended  to  put  the  reader  on  his  guard  against 
all  equivocation,  and  to  afford  him  valuable  preparation  for  appreciat- 
ing Proudhon's  solutions  by  showing  how  utterly  impossible  the 
other  solutions  are. 

His  attack  upon  the  socialists  roughly  amounts  to  a  charge  of 
failure  to  realise  that  the  destruction  of  the  present  regime  would 
involve  taking  a  course  in  the  opposite  direction.  The  difficult 
problem  which  he  set  out  to  solve  was  not  merely  the  suppression  of 
existing  economic  forces,  but  also  their  equilibration.4  He  never 
contemplated  "  the  extinction  of  such  economic  forces  as  division 
of  labour,  collective  effort,  competition,  credit,  property,  or  even 

1  Propriety  ler  Memoir  e,  p.  203. 

a  An  article  in  Le  Peuple,  in  1848.  Proudhon's  attacks  are  more  especially 
directed  against  Fourier.  Fourier's  was  at  this  time  the  only  socialist  school 
that  had  any  influence,  and  this  was  largely  due  to  the  active  propaganda  of 
Victor  Considerant.  See  Contradictions,  vol.  ii,  p.  297,  and  Propriete,  ler  Memoire, 
pp.  153  et  seq. 

1  Contradictions,  vol.  ii,  p.  285.  For  the  attack  on  Cabet,  Louis  Blanc,  and 
the  communists  see  the  whole  of  chap.  12  of  the  Contradictions.  Louis  Blanc 
"  has  poisoned  the  working  classes  with  his  ridiculous  formulae  "  (Idee  generate 
de  la  Revolution,  p.  108).  Louis  Blanc  himself  is  summed  up  as  follows :  "  He 
seriously  thought  that  he  was  the  bee  of  the  Revolution,  but  he  turned  out 
to  be  only  a  grasshopper."  (Ibid.) 

4  "  I  believe  that  I  am  the  first  person  possessed  of  a  full  knowledge  of  the 
phenomena  in  question  who  has  dared  to  uphold  the  doctrine  that  instead  of 
restraining  economic  forces  whose  strength  has  been  so  much  exaggerated  we 
ought  to  try  to  balance  them  against  one  another  in  accordance  with  the  little 
known  and  less  perfectly  understood  principle  that  contraries,  far  from  being 
mutually  destructive,  support  one  another  just  because  of  their  contrary  nature." 
(Justice,  vol.  i,  pp.  265-266. )  The  same  idea  also  finds  expression  on  pp.  302-303. 
Elsewhere  he  remarks  that  what  society  is  in  search  of  is  a  way  of  balancing  the 
natural  forces  that  are  contained  within  itself  (Revolution  demontrie  par  It  Coup 
d'Etat,  p.  4.1). 


PRIVATE  PROPERTY  AND  SOCIALISM  297 

economic  liberty."  l  His  chief  concern  was  to  preserve  them,  but 
at  the  same  time  to  suppress  the  conflict  that  exists  between 
them.  The  socialists  aim  merely  at  destruction.  For  com- 
petition they  would  substitute  an  associative  organisation  of 
labour;  instead  of  private  property  they  would  set  up  community 
of  goods  *  or  collectivism  ;  instead  of  the  free  play  of  personal 
interest  they  would,  according  to  Fourier,  substitute  love,  or  love 
and  devotion,  as  the  Saint-Simonians  put  it,  or  the  fraternity  of 
Cabet.  But  none  of  these  satisfies  Proudhon. 

He  dismisses  association  and  organisation  as  being  detrimental 
to  the  liberty  of  the  worker.8  Labour's  power  is  just  the  result  of 
"  collective  force  and  division  of  labour."  Liberty  is  the  economic 
force  par  excellence.  "  Economic  perfection  lies  in  the  absolute 
independence  of  the  workers,  just  as  political  perfection  consists  in 
the  absolute  independence  of  the  citizens."  *  "  Liberty,"  he  remarks 
in  an  address  delivered  to  the  electors  of  the  department  of  the  Seine 
in  1848,  "  is  the  sum  total  of  my  system — liberty  of  conscience, 
freedom  of  the  press,  freedom  of  labour,  of  commerce,  and  of  teaching, 
the  free  disposal  of  the  products  of  labour  and  industry — liberty, 

1  "  Division  of  labour,  collective  force,  competition,  exchange,  credit,  property, 
and  even  liberty — these  are  the  true  economic  forces,  the  raw  materials  of  all 
wealth,  which,  without  actually  making  men  the  slaves  of  one  another,  give  entire 
freedom  to  the  producer,  ease  his  toil,  arouse  his  enthusiasm,  and  double  his 
produce  by  creating  a  real  solidarity  which  is  not  based  upon  personal  considera- 
tions, but  which  binds  men  together  with  ties  stronger  than  any  which  sympa- 
thetic combination  or  voluntary  contract  can  supply."  (Idee  gknk.ra.le.  de  la 
Rivolution  au  XIX'  Siicle,  p.  95.)  The  economic  forces  are  somewhat  differently 
enumerated  in  chap.  13  of  La  Capar.ite  da  Classes  ouvrieres.  Association  and 
mutuality  are  mentioned  ;  but  while  recognising  the  prestige  of  the  word  "  asso- 
ciation," especially  among  working  men,  Proudhon  concludes  that  the  only  real 
association  is  mutuality — not  in  the  sense  of  a  mutual  aid  society,  which  he 
thinks  is  altogether  too  narrow. 

1  It  is  true  that  Fourier  was  not  a  communist.  Proudhon  shows  that  on  the 
one  hand  his  Phalanstere  would  abolish  interest,  while  it  would  give  a  special 
remuneration  to  talent  on  the  other,  simply  because  "  talent  is  a  product  of  society 
rather  than  a  gift  of  nature."  (Proprieti,  ler  Mbnoire,  p.  156.) 

*  Proudhon's  opposition  to  the  principle  of  association  is  very  remarkable. 
He  refers  to  it  more  than  once,  but  especially  in  the  Idee  generate  de  la  Revolu- 
tion. "  Can  association  be  regarded  as  an  economic  force  ?  For  my  own  part  I 
distinctly  say,  No.  By  itself  it  is  sterile,  even  if  it  does  not  check  production, 
because  of  the  limits  it  puts  upon  the  liberty  of  the  worker."  (P.  89.)  "  Associa- 
tion means  that  everyone  is  responsible  for  someone  else,  and  the  least  counts  as 
much  as  the  greatest,  the  youngest  as  the  oldest.  It  gets  rid  of  inequality, 
with  the  result  that  there  is  general  awkwardness  and  incapacity."  (Ibid.) 

'  La  Revolution  demontree  par  It  Coup  d'Etat,  pp.  53,  54.  Elsewhere:  "When 
you  speak  of  organising  labour  it  seems  as  if  you  would  put  out  the  eyes  of 
liberty."  (Organisation  du  Credit  el  de  I'fichange,  (Xuvrts,  vol.  vi,  p.  01.) 


298       PROUDHON  AND  THE  SOCIALISM  OF  1848 

infinite,  absolute,  everywhere  and  for  ever."  He  adds  that  his  is 
**  the  system  of  '89,"  and  that  he  is  preaching  the  doctrines  of 
Quesnay,  of  Turgot,  and  of  Say.  Indeed,  it  would  not  be  difficult 
to  imagine  ourselves  reading  the  Classical  rhapsodies  concerning  the 
advantages  of  Free  Trade  over  again.1 

Communism  as  a  juridical  system  is  rejected  no  less  ener- 
getically. There  is  no  suggestion  of  suppressing  private  property, 
which  is  the  necessary  stimulant  of  labour,  the  basis  of  family 
life,  and  indispensable  to  all  true  progress.  His  chief  concern 
is  to  make  it  harmless  and  toplace  it  at  the  disposal  of  everyone.2 
"  Communism  is  merely  an  inverted  form  of  private  property. 
Communism  gives  rise  to  inequalities,  but  of  a  different  character 
from  those  of  property.  Property  is  the  exploitation  of  the  weak  by 
the  strong,  communism  of  the  strong  by  the  weak."  3  It  is  still 
robbery.  **  Communism,"  he  exclaims,  "  is  the  religion  of  misery."  * 
"  Between  the  institution  of  private  property  and  communism  there 
is  a  world  of  difference."  * 

Racial  devotion  or  fraternity  as  possible  motives  for  action  are 
not  recognised.  They  imply  the  sacrifice  and  the  subordination  of 
one  man  to  another.  All  men  have  equal  rights,  and  the  freer 
exercise  of  those  rights  is  a  matter  of  justice,  not  of  fraternity. 
Proudhon  thinks  the  axiom  so  very  evident  that  he  takes  no  trouble 
to  explain  it,  but  merely  gives  us  a  definition  of  justice.  In  his  first 
MSmoire  it  is  defined  as  "  a  kind  of  respect  spontaneously  felt  and 
reciprocally  guaranteed  to  human  dignity  in  any  person  and  under 

1  Programme  rivolutionnaire.  To  the  electors  of  the  Seine,  in  the  Repre- 
sentant  du  Peuple.  ((Euvres,  vol.  xvii,  pp.  45,  46.) 

1  "  I  should  like  everybody  to  have  some  property.  We  are  anxious  that  the^ 
should  have  property  in  order  to  avoid  paying  interest,  because  exorbitant 
interest  is  the  one  obstacle  to  the  universal  use  of  property."  (Le  Peuple, 
September  2,  1849.) 

8  ProprUU,  ler  Memoir e,  p.  204. 

4  Contradictions,  vol.  ii,  p.  203. 

•  Organisation  du  Credit  et  de  la  Circulation,  p.  131.  Elsewhere  s  "  To  adopt 
Hegelian  phraseology,  the  community  is  the  first  term  in  social  development — 
the  thesis  ;  property  the  contradictory  term — the  antithesis.  The  third  term — 
the  synthesis — must  be  found  before  the  solution  can  be  considered  complete." 
(Propriete,  ler  Mbmoire,  p.  202.)  That  term  will  be  possession  pure  and  simple — 
the  right  of  property  with  no  claim  to  unearned  income.  "  Get  rid  of  property, 
but  retain  the  right  of  possession,  and  this  very  simple  change  of  principle  will 
result  in  an  alteration  of  the  laws,  the  method  of  government,  and  the  character 
of  a  nation's  economic  institutions.  Evil  of  every  kind  will  be  entirely  swept 
away."  Proudhon  employed  Hegelian  terminology  as  early  as  1840,  four 
years  before  Karl  Griin's  visit  to  Paris.  For  Proudhon's  relation  to  Griin  sea 
Sainte-Beuve's  P.  J.  Proudhon. 


PRIVATE  PROPERTY  AND  SOCIALISM  299 

all  circumstances,  even  though  the  discharge  of  that  feeling  exposes 
us  to  some  risk."  1 

His  juscice  is  tantamount  to  equality.  If  we  apply  the  definition 
to  the  economic  links  which  bind  men  together,  we  find  that  the 
principle  of  mutual  respect  is  transformed  into  the  principle  of 
reciprocal  service.*  Men  must  be  made  to  realise  this  need  for  recip- 
rocal service.  It  is  the  only  way  in  which  equality  can  be  respected. 
"  Do  unto  others  as  you  would  that  others  do  unto  you  " — this 
principle  of  justice  is  the  ethical  counterpart  of  the  economic 
precept  of  mutual  service.8  Reciprocal  service  must  be  the  new 
principle  which  must  guide  us  in  rearranging  the  economic  links  of 
society. 

And  so  a  criticism  of  socialism  helps  Proudhon  to  define  the 
positive  basis  of  his  own  system.  The  terms  of  the  social  problem 
as  it  presents  itself  to  him  can  now  be  clearly  followed.  On  the  one 
hand  there  is  the  suppression  of  the  unearned  income  derived  from 
property — a  revenue  which  is  in  direct  opposition  to  the  principle 
of  reciprocal  service.  On  the  other  hand,  property  itself  must  be 
preserved,  liberty  of  work  and  right  of  exchange  must  be  secured. 
In  other  words,  the  fundamental  attribute  of  property  must  be 
removed  without  damaging  the  institution  of  property  itself  or 
endangering  the  principle  of  liberty.* 

It  is  the  old  problem  of  how  to  square  the  circle.  The  extinction 
of  unearned  incomes  must  involve  the  communal  ownership  of  the 
instruments  of  production,  although  Proudhon  did  not  seem  to  think 
so.  Hitherto  the  reform  of  property  had  been  attempted  by  attack- 
ing the  production  and  distribution  of  wealth.  No  attention  was 
ever  paid  to  exchange.  But  Proudhon  thought  that  in  the  act  of 
exchange  inequality  creeps  in  and  a  new  method  of  exchange  is 
needed.  Towards  the  end  of  the  Contradictions  iconomiques 
he  gives  us  an  obscure  hint  of  the  kind  of  reform  to  be  aimed  at. 
After  declaring  that  nothing  now  remains  to  be  done  except  "  to 
sum  up  all  contradictions  in  one  general  equation,"  he  proceeds  to 
ask  what  particular  form  that  equation  is  to  take.  We  have  already, 

1  Justice  dans  la  Rivolviion,  vol.  i,  pp.  182-183. 

1  Ibid.,  p.  269.  "  It  is  easy  to  show  how  the  principle  of  mutual  respect  is 
logically  convertible  with  the  principle  of  reciprocal  service.  If  men  are  equal 
in  the  eyes  of  justice  they  must  also  have  a  common  necessity,  and  whoever 
would  place  his  brothers  in  a  position  of  inferiority,  against  which  it  is  the  chief 
duty  of  society  to  fight,  is  not  acting  justly." 

*  This  idea  of  mutual  service  is  further  developed,  especially  in  Organisation 
du  Credit  etdela  Circulation  (CEuvres,  vol.  vi,  pp.  92-93),  and  in  Idle  gtncrale,  p.  97. 

•  That  is  how  the  problem  is  put  in  the  preface  to  the  first  Mbnoire. 


300        PROUDHON  AND  THE  SOCIALISM  OF  1848 

he  remarks,  been  permitted  a  glimpse  of  it.  "  It  must  be  a  law 
of  exchange  based  upon  a  theory  of  mutual  help.  This  theory  of 
mutualism — that  is,  of  natural  exchange — is  from  the  collective 
point  of  view  a  synthesis  of  two  ideas — that  of  property  and  that  of 
communism."  x  No  further  definition  is  attempted.  In  a  letter 
written  after  the  publication  of  the  Contradictions  he  still  refers  to 
himself  as  a  simple  seeker,  and  states  that  he  has  a  new  book  in 
preparation,  in  which  these  propositions  are  to  be  further  developed. 

About  the  same  time  he  had  laid  out  his  plans  for  active  propa- 
ganda in  the  press.  But  the  Revolution  of  1848  threw  him  into  the 
miUe  of  party  politics  and  hastened  the  publication  of  his  theories. 

In  order  to  give  a  better  idea  of  the  place  occupied  by  Proudhon's 
ideas,  and  to  show  how  they  were  connected  with  the  socialist 
experiments  of  the  time,  we  must  say  a  few  words  about  the  Revolu- 
tion itself. 


II :   THE  REVOLUTION  OF  1848  AND   THE  DISCREDIT 
OF  SOCIALISM 

SOCIALISTS  of  all  shades  of  opinion,  who  from  1830  to  1840  had  been 
advocating  radical  reforms,  were  given  a  unique  opportunity  of 
putting  their  theories  to  the  test  during  the  Revolution  of  1848. 
During  the  four  months  (February  to  June)  which  preceded  the 
terrible  ruin  of  the  socialist  Republic  by  the  bourgeoisie  projects  of 
all  kinds  which  for  many  years  had  been  discussed  in  books  and 
newspapers  appeared  to  be  on  the  point  of  bearing  fruit.  For  a 
number  of  weeks  nothing  seemed  impossible.  "  The  right  to  work," 
"organisation  of  labour,"  and  "association,"  instead  of  being  so 
many  formulas,  were  by  a  mere  stroke  of  the  magic  wand  to  be 
translated  into  realities. 

Enthusiasts  were  not  wanting  to  attempt  this  task  of  trans- 
formation, but,  alas !  only  to  find  every  scheme  tumble  into  ruins. 
Every  formula,  when  put  to  the  test,  was  found  to  be  void.  The 
malevolence  of  some  people,  the  impatience  of  others,  the  awkward- 
ness and  haste  of  the  promoters  even,  made  the  experiments  odious 
and  ridiculous.  Public  opinion  was  at  last  thoroughly  wearied  and 
all  the  reformers  were  indiscriminately  condemned. 

The  year  1848  is  accordingly  a  memorable  one  in  the  history  of 

social  ideas.     The  idealistic  socialism  of  Louis  Blanc,  of  Fourier,  and 

of  Saint-Simon  was  definitely  discredited.    Bourgeois  writers  thought 

that   it   was   utterly   destroyed.     Reybaud,    who   contributed   the 

1  Contradiction*,  vol.  ii,  p.  414. 


THE  REVOLUTION  OF  1848  801 

article  on  Socialism  to  the  Dictionnaire  cTEconomie  politique  (edited 
by  Coquelin  and  Guillaumin)  in  1852,  writes  as  follows  :  "  To  speak 
of  socialism  nowadays  is  to  deliver  a  funeral  oration.  It  has 
exhausted  itself.  The  vein  is  worked  out.  Should  the  human 
mind  in  its  vertigo  ever  take  it  up  again  it  will  be  in  a  different  form 
and  under  the  influence  of  other  illusions." 

It  fared  scarcely  better  at  the  hands  of  subsequent  socialists.  Marx 
referred  to  all  his  predecessors  under  the  rather  misleading  title  of 
Utopians,  and  against  their  fantastic  dreams  he  set  up  the  "  scientific 
socialism  "  of  Das  Kapital.  Between  the  two  epochs  lies  a  distinct 
cleavage,  marked  by  the  Revolution  of  1848.  We  must  briefly  see 
how  this  was  brought  about,  and  rapidly  review  the  more  important 
experiments  that  were  made. 

First  of  all  there  is  "the  right  to  work."  Fourier's  formula, 
which  was  developed  by  Considerant  and  adopted  by  Louis  Blanc 
and  other  democrats,  became  extremely  popular  during  the  reign 
of  Louis  Phillipe.  Proudhon  speaks  of  it  as  the  only  true  formula 
of  the  February  Revolution.  **  Give  me  the  right  to  work,"  he 
declares,  "  and  I  will  give  you  the  right  of  property."  * 

Workmen  thought  that  the  first  duty  of  the  Provisional  Govern- 
ment was  to  give  effect  to  this  formula.  On  February  25  a 
small  group  of  Parisian  workmen  came  to  the  Hotel  de  Ville  to 
urge  their  claims,  and  the  Government  hastened  to  recognise  them. 
The  decree  drawn  up  by  Louis  Blanc  was  as  follows  :  "  The  Pro- 
visional Government  of  the  French  Republic  undertakes  to  guarantee 
the  existence  of  every  worker  by  means  of  his  labour.  It  further 
undertakes  to  give  work  to  all  its  citizens."  The  following  day 
another  decree  announced  the  immediate  establishment  of  national 
workshops  with  a  view  to  putting  the  new  principle  into  practice. 
All  that  was  necessary  to  gain  admission  was  to  have  one's  name 
inscribed  in  one  of  the  Parisian  municipal  offices. 

Louis  Blanc  in  his  book  of  1841  had  demanded  the  establishment 
of  "  social  "  workshops.  Public  opinion,  misled  by  the  similarity  of 
names,  and  encouraged  to  persist  in  its  error  by  the  enemies  of 
socialism,  thought  that  the  national  workshops  were  the  creation 
of  Louis  Blanc.  Nothing  could  be  more  incorrect.  The  "  social " 
workshops,  as  we  know,  were  to  engage  in  co-operative  production, 
whereas  the  national  workshops  were  to  provide  employment  for 
idlers.  Similar  institutions  had  been  established  during  every  crisis 
bet  ween  1790  and  1830,  generally  under  the  name  of  "  charity  works." 
Moreover,  it  was  Marie,  the  Minister  of  Public  Works,  and  not 
»  Le  Droit  au  Travail  et  It  Droit  de  Proprittt,  pp.  4,  5,  58  (1848). 


302     PROUDHON  AND  THE  SOCIALISM  OF  1848 

Louis  Blanc,  who  organised  them.  Far  from  providing  work  as  the 
socialists  had  hoped,  the  Government  soon  realised  that  the  work- 
shops afforded  an  admirable  opportunity  for  binding  the  workmen 
together  into  brigades  which  might  act  as  a  check  upon  the  socialistic 
tendencies  of  the  Luxembourg  Commission,  then  presided  over  by 
Louis  Blanc.  The  workshops  were  placed  under  the  management 
of  fimile  Thomas,  the  engineer,  who  was  an  avowed  opponent  of 
the  scheme.  In  his  Histoire  des  Ateliers  nationaux,  written  in  1849, 
he  tells  us  how  they  were  controlled  by  him  in  accordance  with  the 
wishes  of  the  anti-socialist  majority  of  the  Provisional  Govern- 
ment.1 

But  they  were  mistaken  in  their  calculations.  Those  who 
thought  that  the  national  workshops  could  be  used  for  their  own 
political  ends  were  soon  undeceived.  The  Revolution  greatly  increased 
the  number  of  idlers,  already  fairly  considerable  as  the  result  of  the 
economic  crisis  of  1847.  Moreover,  the  opening  of  the  workshops 
brought  the  workmen  from  the  provinces  into  Paris.  Instead  of  the 
estimated  10,000,  21,000  had  been  enrolled  by  the  end  of  March, 
and  by  the  end  of  April  there  were  99,400.  They  were  paid  two 
francs  a  day  while  at  work,  and  a  franc  when  there  was  no  work 
for  them.  In  a  very  short  time  it  became  impossible  to  find  employ- 
ment for  so  many.  The  majority  of  them,  whatever  their  trade, 
were  employed  upon  useless  earthworks,  and  even  these  soon  proved 
inadequate.  Discontent  soon  became  rife  among  this  army  of  un- 
fortunate workers,  humiliated  by  the  nature  of  the  ridiculous  labour 
upon  which  they  were  employed,  and  scarcely  satisfied  with  the 
moderate  salary  which  they  received.  The  wages  paid,  however,  were 

1  Every  historian  is  agreed  on  this  point,  which  Louis  Blanc  has  dealt  with 
at  great  length  in  his  Histoire  de  la  Revolution  de  1848  (chap.  11).  The  testi- 
mony of  contemporaries,  especially  Lamartine  in  his  Histoire  de  la  Revolution 
de  1848  (vol.  ii,  p.  120),  is  also  very  significant.  "  These  national  workshops  were 
placed  under  the  direction  of  men  who  belonged  to  the  anti-socialist  party,  whose 
one  aim  was  to  spoil  the  experiment,  but  who  managed  to  keep  the  sectaries  of 
the  Luxembourg  and  the  rebels  of  the  clubs  apart  until  the  meeting  of  the 
National  Assembly.  Paris  was  disgusted  with  the  quantity  and  the  character 
of  the  work  accomplished,  but  it  little  thought  that  these  men  had  on  more 
than  one  occasion  defended  and  protected  the  city.  Far  from  being  in  the  pay 
of  Louis  Blanc,  as  some  people  seem  to  think,  they  were  entirely  at  the  beck  and 
call  of  bis  opponents."  E.  Thomas  in  his  Histoire  des  Ateliers  nationaux  (pp.  146- 
147)  relates  how  Marie  sent  for  him  on  May  23  and  secretly  asked  him  whether 
the  men  in  the  workshops  could  be  relied  upon.  "  Try  to  get  them  strongly 
attached  to  you.  Spare  no  expense.  If  there  is  any  need  we  shall  give  you  plenty 
of  money."  Upon  Thomas  asking  what  was  the  purpose  of  all  this,  Marie  replied  : 
"It  is  all  in  the  interest  of  public  safety.  Make  sure  of  the  men.  The  day  is 
not  far  distant  when  we  shall  need  them  in  the  streets," 


THE  REVOLUTION  OF  1848  803 

more  than  enough  for  the  kind  of  work  that  was  being  done.  The 
workshops  became  centres  of  political  agitation,  and  the  Government, 
thoroughly  alarmed,  and  acting  under  pressure  from  the  National 
Assembly,  was  constrained  to  abandon  them. 

Suddenly,  on  June  21,  a  summons  was  executed  upon  all  men 
between  seventeen  and  twenty-five  enrolled  in  the  shops,  ordering 
them  to  join  the  army  or  to  leave  for  the  country,  where  more  digging 
awaited  them.  The  exasperated  workmen  rose  in  revolt.  Rioting 
broke  out  on  June  23,  but  it  was  crushed  in  three  days.  Hundreds 
of  the  workers  died  in  the  struggle,  and  the  country  was  terrorised 
into  reaction. 

That  simple  logic  which  is  always  so  characteristic  of  political 
parties  held  the  principle  of  "  the  right  to  work  "  responsible  for  this 
disastrous  experience,  and  it  was  definitely  condemned.  This  is 
quite  clear  from  the  constitutional  debates  in  the  National  Assembly. 
The  constitutional  plan  laid  down  by  Armand  Marrast  on  June  19, 
a  few  days  before  the  riots,  recognised  "  the  right  to  work."  "  The 
Constitution,"  says  Article  2,  "  guarantees  to  every  citizen  liberty, 
equality,  security,  instruction,  work,  property,  and  public  assist- 
ance." But  in  the  new  plan  of  August  29 — after  the  experience  of 
June — the  article  disappeared.  The  right  to  relief  only  was  recog- 
nised. In  the  discussion  on  the  article  an  amendment  re-establishing 
"  the  right  to  work  "  was  proposed  by  Mathieu  de  la  Drdme.  A 
memorable  debate  followed,  in  which  Thiers,  Lamartine,  and  Tocque- 
ville  opposed  the  amendment,  while  the  Radical  Republicans  Ledru- 
Rollin,  Cremieux,  and  Mathieu  de  la  Drome  defended  it.1  The 
socialists  had  become  extinct.  Louis  Blanc  was  in  exile,  Consideiant 
ill,  while  Proudhon  was  afraid  of  startling  his  opponents  and  of 
compromising  his  friends.  Besides,  the  Assembly  had  already  made 
up  its  mind.  The  amendment  was  defeated,  and  Article  8  of  the 
preamble  to  the  Constitution  of  1848  runs  as  follows  :  **  The 
Republic  by  means  of  friendly  assistance  should  provide  for  its 
necessitous  citizens,  either  by  giving  them  work  as  far  as  it  can, 
or  by  directly  assisting  those  who  are  unable  to  work  and  have  no 
one  to  help  them." 

During  the  reign  of  the  July  Monarchy  "  the  organisation  of 
labour  "  was  another  phrase  which  divided  the  honours  with  "  the 
right  to  work."  With  the  spread  of  the  Revolution  came  a  similar 
menacing  demand  for  its  realisation.  By  a  strange  coincidence  the 
author  of  this  formula  was  also  a  member  of  the  Provisional  Govern- 

1  These  addresses  were  afterwards  published  in  a  volume  entitled  Le  Droit 
au  Travail. 


304        PROUDHON  AND  THE  SOCIALISM  OF  1848 

ment.  And  so  when  on  February  28,  three  days  after  the  recognition 
of  "  the  right  to  work,"  the  workers  came  in  a  body  and  claimed  the 
creation  of  a  Minister  of  Progress,  the  organisation  of  labour,  and 
the  abolition  of  all  exploitation,  Louis  Blanc  immediately  seized  the 
opportunity  to  urge  his  unwilling  colleagues  to  accede  to  their 
demands.  He  himself  had  pressed  the  Government  to  take  the 
initiative  in  social  reform,  and  now  that  the  Revolution  had  made 
him  a  member  of  the  Government  how  could  he  escape  his  responsi- 
bility ?  After  some  difficulty  his  colleagues  succeeded  in  persuadind 
him  to  accept  the  alternative  of  a  Government  commission  on  labour, 
of  which  he  was  to  be  president.  The  commission  was  entrusted 
with  the  task  of  drawing  up  the  proposed  reforms,  which  were  after- 
wards to  be  submitted  to  the  National  Assembly.  To  mark  the 
contrast  between  the  old  and  the  new  regime  the  commission  carried 
on  its  deliberations  in  the  Palais  du  Luxembourg,  where  the  Chambre 
des  Pairs  formerly  sat. 

The  Luxembourg  commission  was  composed  of  representatives 
elected  by  workmen  and  masters,  three  for  each  industry.  The 
representatives  met  in  a  general  assembly  to  discuss  the  reports 
prepared  by  a  permanent  committee  of  ten  workers  and  an  equal 
number  of  masters,  to  which  Louis  Blanc  had  added  a  few  Liberal 
economists  and  socialists,  such  as  Le  Play,  Dupont- White,  Wolowski, 
Considdrant,  Pecqueur,  and  Vidal.  Proudhon  was  also  invited,  but 
refused  to  join.  As  a  matter  of  fact,  only  the  workers  took  part  in 
the  sittings. 

The  commission,  although  it  possessed  no  executive  power, 
might  have  been  of  some  service.  But  Louis  Blanc,  as  he  himself 
confessed,  regarded  it  as  "  a  golden  opportunity  where  socialism  had 
at  its  disposal  a  tribunal  from  which  it  could  address  the  whole  of 
Europe." 1  He  still  kept  up  his  role  of  orator  and  writer,  and 
devoted  most  of  the  sittings  to  an  eloquent  appeal  for  the  theories 
already  outlined  in  his  Organisation  of  Labour.*  Vidal  and  Pecqueur 
undertook  the  task  of  elaborating  the  more  definite  proposals.  In  a 
lengthy  report  which  appeared  in  the  Moniteur  8  they  outlined  a 
plan  of  State  Socialism,  with  workshops  and  agricultural  colonies, 

1  Louis  Blanc,  Histoire  de  la  Revolution  de  1848,  vol.  ii,  p.  135. 

1  See  the  addresses  in  his  La  Revolution  de  Fevrier  au  Luxembourg  (Paris, 
1849). 

*  Moniteur,  April  27,  May  2,  3,  and  6, 1848.     The  dismissal  of  the  commission 
meant  an  interruption  of  the  Exposi  general,  but  Vidal  in  his  work  Vivre  en  travail- 
lant  I   Projets,  Voires,  et  Moyens  de  Reformer  aociales  (1848)  continued  the  exposi 
tion.     It  contains  a  plan  for  agricultural  credit,  a  State  land  purchase  scheme  in 
Order  to  get  rid  of  rent,  a  proposal  for  buying  up  railways  and  mines  and  for 


THE  REVOLUTION  OF  1848  805 

with  State  depots  and  bazaars  as  places  of  sale.  Money  in  the  form 
of  warrants  was  to  be  borrowed  on  the  security  of  goods,  and  a 
State  system  of  insurance — excepting  life  policies — was  to  be 
established.  Finally,  the  Bank  of  France  was  to  be  transformed 
into  a  State  bank.  This  was  to  extend  the  operation  of  credit, 
and  to  reduce  the  rate  of  discount  simply  to  insurance  against 
risk.  Vidal  and  not  Pecqueur  is  obviously  the  author  of  the  report, 
for  it  contains  some  of  the  projects  that  had  already  appeared  in 
his  book  De  la  Repartition  des  Richesses, 

None  of  the  projects  was  even  discussed  by  the  National 
Assembly.  The  only  positive  piece  of  work  accomplished  by  Louis 
Blanc's  commission  was  done  under  pressure  from  the  workmen. 
This  was  the  famous  decree  of  March  2,  abolishing  piece-work 
and  reducing  the  working  day  to  ten  hours  in  Paris  and  eleven  hours 
in  the  provinces.  This  decree,  though  it  was  never  put  into 
operation,  marks  the  first  rudiments  of  French  labour  legislation. 
Louis  Blanc  was  forced  to  grant  it  because  the  working-class  element 
on  the  commission  refused  to  take  part  in  its  proceedings  until  they 
were  satisfied  on  this  point.  The  commission  must  also  be  credited 
with  several  successful  attempts  at  conciliation. 

Not  only  did  the  commission  fail  to  do  anything  permanent, 
but  its  degeneracy  into  a  mere  political  club  thoroughly  alarmed 
the  public.  It  became  involved  in  elections,  and  even  intervened 
in  street  riots.  It  finally  took  a  part  in  the  demonstration  of 
May  15,  which,  under  pretext  of  demanding  intervention  in 
favour  of  Poland,  resulted  in  an  invasion  of  the  National  Assembly 
by  the  mob.  Louis  Blanc  had  already  retired.  Since  the  reunion 
of  the  National  Assembly  the  Government  had  been  replaced  by  an 
executive  commission,  and  Blanc,  no  longer  a  supporter  of  the 
Government,  sent  in  his  resignation  on  May  13.  After  that  the 
commission  was  at  an  end,  and,  like  the  national  workshops, 
it  all  resulted  in  nothing  save  a  general  discredit  of  socialist 
opinion. 

There  still  remained  the  "  working  men's  associations."  Every 
socialist  writer  of  the  early  nineteenth  century  was  agreed  on  this 
principle  of  association.  Every  reformer,  with  the  exception  of 
Proudhon,1  who  always  pursued  a  path  of  his  own,  regarded  it  as 
the  one  method  of  emancipation.  It  was  quite  natural  that  it  should 
be  put  to  the  test. 

erecting  cheap  dwellings.     It  affords  an  interesting  example  of  State  Socialism 
in  1848  which  seems  to  have  struck  many  people  then  as  being  very  amusing. 
1  Cf.  tupra,  p.  297,  note  3. 


306      PROUDHON  AND  THE  SOCIALISM  OF  1848 

In  its  declaration  of  February  26  the  Provisional  Government 
stated  that  besides  securing  the  right  to  work,  the  workers 
must  combine  together  before  they  could  secure  the  full  benefit 
of  their  labour.  The  moment  Louis  Blanc  attained  to  power  he 
sought  to  guide  the  energies  of  the  commission  in  this  direction. 
The  "  Association  "  was  to  be  of  the  nature  of  a  co-operative  produc- 
tive society,  supported  by  the  State.  Under  the  influence  of  Buchez, 
an  old  Saint- Simonian,  a  Republican  Catholic  and  the  founder  of 
the  newspaper  called  IS  Atelier,  there  had  been  formed  in  1834  an 
association  of  jewellers  and  goldsmiths.1  But  it  was  a  solitary 
exception. 

Louis  Blanc  was  more  fortunate.  He  successively  founded 
associations  of  tailors,  of  saddlers,  of  spinners  and  lace-makers,  and 
he  secured  Government  orders  for  tunics,  saddles,  and  epaulettes 
for  them.  Other  associations  followed,  and  by  July  5  the 
National  Assembly  was  sufficiently  interested  in  these  experiments 
to  vote  the  sum  of  three  millions  to  their  credit.  A  good  portion  of 
this  sum  passed  into  the  hands  of  mixed  associations  of  masters  and 
men  formed  with  the  sole  purpose  of  benefiting  by  the  Government's 
liberality.  The  workmen's  associations  pure  and  simple,  however, 
received  more  than  a  million,  and  there  was  not  a  sou  of  it  left  by 
1849. 

The  first  co-operative  movement  inspired  by  the  ideas  of 
Louis  Blanc  was  of  short  duration.  The  National  Assembly  took 
good  care  to  place  the  new  societies  under  Ministerial  control  by 
appointing  a  Conseil  6? Encouragement,  nominated  by  the  Ministry  to 
fix  the  conditions  under  which  loans  should  be  granted.  The 
Conseil  hastened  to  publish  model  regulations  which  left  the  associa- 
tions little  scope  for  internal  organisation.  So  stringent  were  the 
rules  that  several  of  them  were  immediately  jeopardised,  and  every 
society  which  failed  to  conform  to  one  of  the  three  models  outlined 
in  Article  19  of  the  Commercial  Code  was  obliged  to  dissolve.  This 
meant  every  society  which  was  not  nominally  a  collective  society, 
a  joint  stock  or  a  limited  liability  company.  By  1855,  according 
to  the  testimony  of  Reybaud,  there  remained  only  nine  out  of  those 
subsidised  in  1848.  Consumers'  co-operative  societies,  that  is,  the 
societies  which  aimed  at  securing  cheap  commodities,  established 
at  Paris,  Lille,  Nantes,  and  Grenoble,  were  also  dissolved. 

And  so  all  these  experiments — the  only  ones  that  had  not  already 
brought  reformers  into  discredit — were  destined  to  fail  in  their  turn. 
Their  extinction  was  partly  due  to  political  causes,  partly  to  their 
1  Of.  tupra,  "  Tk?  Associative  Socialist*." 


THE  EXCHANGE  BANK  THEORY      307 

founders,  who   had   not   yet   been  trained  in  the  difficult  task  of 
building  up  such  associations. 

The  social  experiments  of  1848  one  after  another  foundered, 
bringing  a  distrust  of  theories  in  their  train.  There  still  remained 
one  other  experiment  connected  with  Proudhon's  name — that  of 
free  credit.  But  it  also  was  destined  to  fail  like  the  rest. 


Ill :  THE  EXCHANGE  BANK  THEORY 

THE  Revolution  of  1848  did  not  take  Proudhon  quite  unawares, 
although  he  considered  the  outbreak  was  rather  sudden.  He  was 
soon  convinced  that  the  real  problem  to  be  determined  was  eco- 
nomic rather  than  political,  but  he  also  realised  that  the  education 
of  the  masses  was  too  backward  to  permit  of  a  peaceful  solution. 
Proudhon,  in  this  matter  at  one  with  his  French  confreres,  had 
hoped  for  such  a  solution.1  He  thought  the  February  Revolution 
was  a  child  prematurely  born.1  In  a  striking  article  in  the  columns 
of  Le  Peuple  he  gave  wistful  expression  to  his  fears  as  he  foresaw 
the  Revolution  impending.  Its  solution  had  been  delivered  to  none 
and  its  interpretation  baffled  the  ingenuity  of  all. 

"I  have  wept  over  the  poor  workman,  whose  daily  bread  is  already 
sufficiently  uncertain  and  who  has  now  suffered  misery  for  many 
years.  I  have  undertaken  his  defence,  but  I  find  that  I  am  powerless 
to  succour  him.  I  have  mourned  over  the  bourgeois,  whose  ruin  I 
have  witnessed  and  who  has  been  driven  to  bankruptcy  and  goaded 
to  opposition  of  the  proletariat.  My  personal  inclination  is  to 
sympathise  with  the  bourgeois,  but  a  natural  antagonism  to  his 
ideas  and  the  play  of  circumstance  have  made  me  his  opponent. 
I  have  gone  in  mourning  and  paid  penance  for  the  spirit  of  the 
old  Republic  long  before  there  were  any  signs  of  its  offspring. 
This  Revolution  which  was  to  restore  the  public  order  merely  marks 
the  beginning  of  a  new  departure  in  social  revolution  which  no  one 
understands."  s 

But  the  Revolution  having  once  begun,  Proudhon  did  not  feel 

1  "  I  need  hardly  say  that  this  measure  of  fiscal  reform  [namely,  the  abolition 
of  private  property]  must  be  carried  out  without  any  violence  or  robbery.  There 
must  be  no  spoliation,  but  ample  compensation  must  bo  given."  (Reaumi  de  la 
Question  sociale,  p.  27.) 

*  Solution  du  Prdbl&me.  social  (CEuvrea,  vol.  vi,  p.  32). 

8  CEuvres,  vol.  xviii,  pp.  6-7.  See  also  the  letter  dated  February  26,  1848 
(Corrupondance,  vol.  ii,  p.  280) :  "  France  will  certainly  accomplish  it,  whether 
it  remains  a  republic  or  not.  It  might  even  be  carried  out  by  the  present  deca- 
dent Government,  at  a  trifling  coat."  This  thought  did  not  prevent  his  taking 
a  hand  in  the  Revolution. 


308         PROUDHON   AND   THE    SOCIALISM    OF    1848 

himself  justified  in  being  behindhand.  He  had  been  a  most  severe 
critic  of  the  existing  regime,  and  he  felt  that  he  was  bound  to 
attempt  a  solution  of  the  practical  problems  which  suddenly  came 
to  the  front.  He  became  a  journalist  and  threw  himself  whole- 
heartedly into  the  struggle.  Hitherto  he  had  been  content  with 
vague  suggestions  as  to  where  the  evil  lay.  But  now  he  was  anxious 
to  make  reform  practicable  and  to  fill  in  the  details  of  the  scheme ; 
and  so  he  invented  the  Exchange  Bank. 

Proudhon's  exposition  of  the  scheme  is  contained  in  a  number 
of  pamphlets,  in  newspapers,  and  in  his  books.1  The  explanations 
do  not  always  tally,  and  he  is  not  always  happy  in  stating  exactly 
what  he  thinks.  This  explains  why  he  has  been  so  often  misunder- 
stood. We  shall  try  to  give  a  risutni  of  his  ideas  before  proceeding 
to  criticise  them  and  to  compare  them  with  analogous  projects 
formulated  both  before  and  after  his  time.  This  will  help  us  to 
understand  where  the  originality  of  the  scheme  lay. 

The  fundamental  principle  on  which  the  whole  scheme  rests  is 
somewhat  as  follows  :  Of  all  the  forms  of  capital  which  allow  of 
a  right  of  escheat  to  the  product  of  the  worker,  whether  in  the  form 
of  rent,  of  interest,  or  of  discount,  the  most  important  is  money, 
for  it  is  only  in  the  form  of  money  that  these  dues  are  actually 
paid.8  If  we  could  suppress  the  right  of  escheat  in  the  case  of  this 
universal  form  of  capital — in  other  words,  if  interest  were  abolished 
— the  right  of  escheat  in  every  other  case  would  soon  disappear. 

Let  us  suppose  that  by  means  of  some  organisation  or  other 
money  required  for  the  purchase  of  land,  machinery,  and  buildings 
for  industrial  purposes  could  be  procured  without  interest.  Were 
this  the  case  the  required  capital  would  then  be  obtained  in  that 
way  instead  of  by  payment  of  interest  or  rent  as  is  the  case  to-day. 

1  In  a  pamphlet  entitled  Organisation  du  Credit  et  dela  Circulation,  and  dated 
March  31,  1848,  he  expounds  the  principle  of  the  scheme  and  indicates  some  of 
its  general  features.  The  scheme  is  dealt  with  in  a  number  of  articles  contributed 
to  Le  Reprisentant  du  Peuple  for  April,  afterwards  published  in  book  form 
by  Darimon,  under  the  title  of  Resumt  de  la  Question  sociale.  The  plan  differs 
slightly  from  the  statute*  of  the  People's  Bank  as  they  appear  in  vol.  vi  of  the 
CEuvrcs,  but  the  guiding  principle  is  much  the  same.  A  further  exposition  was 
given  in  Le  Peuple  in  February  and  March  1849,  just  when  the  Bank  was  being 
founded.  There  is  still  another  account  contained  in  the  volume  entitled  Interet 
et  Principal :  Discussion  entre  M.  Proudhon  and  M.  Bastiat  sur  V Interet  du 
Capitaux  (Paris,  1880).  This  controversy  was  carried  on  in  the  columns  of  La 
Voix  du  Peuple  from  October  1849  to  October  1850.  Proudhon  frequently  refers 
to  the  same  idea  in  his  other  works,  notably  in  Justice  dans  la  Revolution,  rol.  i, 
pp.  289  et  seq.,  and  in  Idee  ginerale,  pp.  197  et  seq. 

1  See  Solution  du  Probleme  tocial,  pp.  178,  179. 


THE  EXCHANGE  BANK  THEORY      809 

The  suppression  of  money  interest  would  enable  the  worker  to 
borrow  capital  gratuitously,  and  would  give  him  immediate  control 
over  all  useful  capital  instead  of  renting  it.  All  attempts  to  hold 
up  capital  for  the  sake  of  receiving  interest  without  labour  would 
thus  be  frustrated.  The  right  of  property  would  be  reduced  to 
mere  possession.  Exchange  would  be  reciprocal,  and  the  worker 
would  secure  all  the  produce  of  his  labour  without  having  to  share 
it  with  others.  In  short,  economic  justice  would  be  secured. 

This  is  all  very  well,  but  how  can  the  necessary  money  be 
obtained  without  paying  interest  ?  Everything  depends  upon  that. 

Proudhon  invites  us  to  consider  what  money  really  is.  It  is  a 
mere  medium  of  exchange  which  is  designed  to  facilitate  the  circula- 
tion of  goods.  Proudhon,  who  had  hitherto  regarded  money  a« 
capital  par  excellence,  now  treats  it  as  a  mere  instrument  of  exchange. 
"  Money  by  itself  is  of  no  use  to  me.  I  merely  take  it  in  order  to  part 
with  it.  I  can  neither  consume  it  nor  cultivate  it."  x  It  is  a  mere 
medium  of  exchange,  and  the  interest  paid  merely  covers  this  cost 
of  circulation.2  But  paper  money  will  fulfil  this  function  quite  as 
well  and  much  more  cheaply.  Banks  advance  money  in  exchange 
for  commodities  or  supply  bills  which  are  immediately  transferable 
into  cash.  In  exchange  for  this  service  the  banker  receives  a 
discount  which  goes  to  remunerate  the  shareholders  who  have 
supplied  the  capital.  Why  not  establish  a  bank  without  any  capital 
which,  like  the  Bank  of  France,  will  discount  goods  with  bills — either 
circulation  or  exchange  notes?  The  bills  would  be  inconvertible, 
and  consequently  would  cost  scarcely  anything,  and  there  would  be 
no  capital  to  remunerate. 

The  service  given  would  be  equal  to  that  given  by  the  banks,  but 
would  cost  a  great  deal  less.  All  that  would  be  required  to  ensure 
the  circulation  of  the  bills  would  be  an  understanding  on  the  part 
of  the  clientele  of  the  new  bank  that  they  would  accept  them  as 
payment  for  goods.  The  bearer  would  thus  be  certain  that  they 
were  always  immediately  exchangeable,  just  as  if  they  were  cash. 
The  clients  would  lose  nothing  by  accepting  them,  for  the  statutes 
would  decree  that  the  bank  should  never  trade  in  anything  except 
goods  actually  delivered  or  under  promise  of  delivery.  The  notes  in 
circulation  would  never  exceed  the  demands  of  commerce.  They 
would  always  represent  goods  already  produced  and  actually  sold, 

1  Inttrct  et  Principal,  p.  112. 

1  "  Money  is  simply  a  supplementary  kind  of  capital,  a  medium  of  exchange 
or  a  credit  instrument.  If  this  is  the  case  what  claim  has  it  to  payment  ?  To 
think  of  remunerating  money  for  the  servic*  which  it  gives  1  "  (Jbuhp.  113.) 


310      PROUDHON  AND  THE  SOCIALISM  OF  1S48 

but  not  yet  paid  for.1  Following  the  example  of  other  banks,  the 
bank  would  advance  to  the  seller  of  the  goods  a  sum  of  money  which 
it  would  subsequently  recover  from  the  buyer.  The  merchants 
and  manufacturers  would  obtain  not  only  their  circulating  capital 
without  payment  of  interest,  but  also  the  fixed  capital  necessary  for 
the  founding  of  new  industries.  These  advances  obtained  without 
interest  would  enable  them  to  buy  and  not  merely  to  rent  the 
instruments  of  production  which  they  needed.2 

The  consequences  of  a  reform  of  this  kind  cannot  be  easily 
enumerated.  Not  only  would  capital  be  freely  placed  at  the  disposal 
of  everyone,  but  every  class  distinction  would  disappear  3  as  soon 
as  the  worker  ceased  selling  his  products  at  cost  price  *  and  govern- 
ment itself  would  become  useless.  The  aim  of  all  government  is  to 
check  the  oppression  of  the  weak  by  the  strong.5  But  the  moment 
fair  exchange  becomes  possible,  free  contract  is  sufficient  to  secure 
this ;  there  is  no  longer  anyone  who  is  oppressed.  All  are  equally 
favoured,  for  the  cause  of  contention  has  been  removed.  "  Once 
capital  and  labour  are  identified,  society  will  subsist  of  its  own 
accord,  and  there  will  no  longer  be  any  need  for  government." 

1  Cf .  Resume  de  la  Question  sociale,  p.  39. 

1  Moreover,  the  advances  will  take  the  form  of  discount.  The  entrepreneur 
who  has  some  scheme  which  he  wishes  to  carry  out  "  will  in  the  first  place  collect 
orders,  and  on  the  strength  of  those  orders  get  hold  of  some  producer  or  dealer 
who  has  such  raw  material  or  services  at  his  disposal.  Having  obtained  the  goods, 
he  pays  for  them  by  means  of  promissory  notes,  which  the  bank,  after  taking  due 
precaution,  will  convert  into  circulation  notes."  The  consumer  is  really  a  sleeping 
partner  in  the  business,  and  between  him  and  the  entrepreneur  there  is  no  need 
for  the  intervention  of  money  at  all.  (Organisation  du  Credit,  (Euvres,  vol.  vi, 
p.  123.)  Discount  was  the  fundamental  characteristic  of  the  bank,  and  no 
criticism  is  directed  against  this  feature  of  its  operations. 

»  "  How  to  resolve  the  bourgeoisie  and  the  proletariat  into  the  middle  class,  the 
class  which  lives  upon  its  income  and  that  which  draws  a  salary  into  a  class  which 
has  neither  revenue  nor  wages,  but  lives  by  inventing  and  producing  valuable 
commodities  to  exchange  them  for  others.  The  middle  class  is  the  most  active 
class  in  society,  and  is  truly  representative  of  a  country's  activity.  This  was 
the  problem  in  February  18.48."  (Revolution  demontrie  par  le  Coup  d'Stat,  p.  135.) 

*  "  Reciprocity  means  a  guarantee  on  the  part  of  those  who  exchange  com- 
modities to  sell  at  cost  price."     (Idee  generate  de  la  Revolution,  pp.  97-98.) 

•  "  The  very  existence  of  the  State  implies  antagonism  or  war  as  the  essential 
or  inevitable  condition  of  humanity,  a  condition  that  calls  for  the  intervention  of 
a  coercive  force  which  shall  put  an  end  to  the  struggle  continually  waging  between 
the  weak  and  the  strong."     ( Voix  du  Peuple,  December  3, 1849  ;  (Euvres,  vol.  xix, 
p.  23.)  "  When  economic  development  has  resulted  in  the  transformation  of  society 
even  despite  itself,  then  the  weak  and  the  strong  will  alike  disappear.    There  will 
only  be  workers  ;  and  industrial  solidarity,  and  a  guarantee  that  their  products  will 
be  told.,  will  tend  to  make  them  equal  both  in  capacity  and  wealth."  (Ibid.,  p.  18.) 


THE  EXCHANGE  BANK  THEORY      811 

Government  has  "  its  origin  and  its  whole  being  immersed  in  the 
economic  system."  Proudhon's  system  means  anarchy — the  absence 
of  government.1 

Such  is  Proudhon's  plan,  and  such  its  consequences.  To  under- 
stand its  full  significance  we  must  inquire  whether  (1)  the  substitu- 
tion of  exchange  notes  for  bank-notes  payable  at  sight  is  practicable, 
and,  (2)  supposing  it  to  be  practicable,  if  it  is  likely  to  have  the  effects 
anticipated  by  its  author. 

Proudhon  states  that  his  system  merely  involves  the  universal 
adoption  of  exchange  notes.2  The  Exchange  Bank  would  merely 
append  the  manager's  signature  against  the  particular  commodity 
discounted.  But  the  issue  of  bank-notes  at  the  present  time  involves 
nothing  more  than  this.  Instead  of  the  bill  of  exchange  which  it  now 
buys,  and  which  enjoys  only  a  limited  circulation  because  the  signa- 
tories have  only  a  very  limited  credit,  it  is  proposed  that  the  Bank 
of  France  should  substitute  a  note  bearing  its  own  signature,  which 
is  universally  known  and  testifies  to  an  illimitable  amount  of  credit. 
In  what  respects,  then,  does  Proudhon's  circulating  medium  differ 
from  a  bank-note  ?  It  differs  simply  in  the  fact  that  the  signature  of 
the  Bank  of  France  involves  a  promise  of  reimbursement  in  metallic 
money,  a  commodity  universally  accepted  and  demanded,  while 
Proudhon's  Exchange  Bank  enters  into  no  such  definite  agreement, 
but  merely  undertakes  to  accept  it  in  lieu  of  payment. 

Theoretically,  perhaps,  the  difference  may  appear  insignificant, 

1  "  Consequently  we  consider  ourselves  anarchists  and  we  have  proclaimed 
the  fact  more  than  once.     Anarchy  is  suitable  for  an  adult  society  just  as  hierachy 
is  for  a  primitive  one.     Human  society  has  progressed  gradually  from  hierarchy 
to  anarchy."     (CEuvres,  vol.  xix,  p.  9.)    A  little  later,  in  Idee  gknkralt  de  la 
Revolution,  he  states  that  the  aim  of  the  Revolution  was  "  to  build  up  a  property 
constitution  and  to  dissolve  or  otherwise  cause  the  disappearance  of  the  political 
or  government  system  by  reducing  or  simplifying,  by  decentralising  and  suppress- 
ing the  whole  machinery  of  the  State."    This  idea  was  borrowed  from  Saint- 
Simon,  and  Proudhon  has  acknowledged  the  debt  in  his  Idie  gkntrale..     This 
conception  of  industrial  society  rendering  government  useless  or  reducing  it  to 
harmless  proportions  is  a  development,  though  perhaps  somewhat  extravagant, 
of  the  economic  Liberalism  of  J.  B.  Say.    The  first  edition  of  the  M emoire  tur 
la  Proprieti  contains  an  admission  of  anarchical  tendencies.    "  What  are  you, 
then  ?     I  am  an  anarchist. — I  understand  your  doubts  on  this  question.    You 
think  that  I  am  against  the  Government. — That  is  not  so.     You  asked  for  my 
confession  of  faith.     Having  duly  pondered  over  it,  and  although  a  lover  of  order, 
I  have  come  to  the  conclusion  that  I  am  in  the  fullest  sense  of  the  word  an 
anarchist." 

2  "  The  whole  problem  of  circulation  is  how  to  make  the  exchange  note  uni- 
versally acceptable,  how  to  secure  that  it  shall  always  be  exchangeable  for  goods 
and  services  and  convertible  at  sight."     (Organisation  du  Credit,  (Euvres,  vol.  ri, 
pp.  113,  114.) 


812        PROUDHON  AND  THE  SOCIALISM  OF  1848 

since  the  signatures  are  the  only  guarantee  of  the  solvency  of  the 
notes  of  the  Bank  of  France  and  the  Exchange  Bank  alike. 
But  in  practice  it  is  enormous.  The  certainty  that  the  note  can 
be  exchanged  for  money  gives  it  a  wide  currency  and  makes  it 
acceptable  to  many  people  who  rely  implicitly  upon  their  confidence 
in  the  bank.  They  need  give  no  thought  to  the  question  of  its 
solvency.  A  mere  circulating  medium,  on  the  other  hand,  in  addition 
to  transferring  a  claim  to  certain  goods  belonging  to  clients  of  the 
bank,  involves  a  certain  amount  of  confidence  in  the  solvency  of 
those  clients — a  confidence  not  always  easily  justified.  A  note  of 
this  kind  will  only  circulate  among  the  bank's  clientele.  It  will 
never  reach  the  general  public  as  the  bank-note  actually  does.  The 
clients  themselves  will  keep  their  engagements  just  so  long  as  the 
bank  continues  to  discount  goods  that  have  actually  been  delivered 
and  never  refuses  payment  when  it  falls  due.  Failing  this,  the 
exchange  notes,  instead  of  regularly  returning  to  the  bank,  will 
remain  in  circulation.  A  alight  crisis  or  a  little  tension,  and  many 
of  the  clients  will  become  insolvent.  The  total  nominal  value  of 
the  exchange  notes  will  quickly  surpass  the  actual  value  of  the  goods 
which  they  represent.  There  will  be  a  rapid  depreciation,  and  clients 
even  will  refuse  to  take  them. 

It  is  just  possible  to  conceive  of  the  circulation  of  such  exchange 
notes,  but  the  area  of  circulation  will  be  a  very  limited  one,  and  it 
will  be  utterly  impossible  if  all  the  clients  are  not  perfectly  solvent. 

Let  us,  however,  suppose  that  the  practical  difficulties  have 
been  overcome,  and  that  the  exchange  notes  are  already  in  circulation. 
Interest  will  not  disappear  even  then,  and  herein  lies  the  essential 
weakness  of  the  system. 

Why  does  the  Bank  of  France  charge  a  discount  ?  Is  it,  as 
Proudhon  suggests,  because  it  supplies  cash  in  return  for  a  bill  of 
exchange,  so  that  "the  seigneurial  right  of  discount"  *  would  dis- 
appear with  the  adoption  of  a  non-metallic  currency  ?  The  bank 
charges  discount  simply  because  it  gives  a  certain  quantity  of 
merchandise  immediately  exchangeable  in  return  for  a  bill  of 
exchange  falling  due  some  months  hence.  It  gives  a  tangible 
commodity  in  exchange  for  a  promise — a  present  good  for  a  future. 
What  the  bank  takes  is  the  difference  between  the  present  value  ol 
the  bill  of  exchange  and  its  value  when  it  falls  due.  It  is  not  the 
mere  whim  of  the  banker  or  the  employment  of  a  particular  kind  of 
money  that  gives  rise  to  discount.  It  belongs  to  the  very  nature 
of  things.  Proudhon  notwithstanding,  a  sale  for  cash  and  a  sale 
1  Organisation  du  Credit. 


THE  EXCHANGE  BANK  THEORY      313 

with  future  payment  must  remain  two  different  operations,1  at  least 
as  long  as  the  actual  possession  of  a  good  is  judged  to  be  more 
advantageous  than  its  future  possession. 

This  difference,  even  in  the  case  of  the  Exchange  Bank,  would 
very  soon  reappear.  The  exchange  notes  would  represent  goods 
which  were  to  be  sold  at  a  certain  date.  Although  the  Bank  may 
refuse  to  discount,  this  will  not  lessen  the  advantage  enjoyed  by 
those  merchants  who  are  paid  in  cash.  In  order  to  secure  this 
advantage  they  will  enter  into  agreement  with  those  buyers  who  pay 
cash  either  in  the  form  of  goods  or  of  precious  metals  (which  are, 
after  all,  commodities),  granting  a  slight  rebate  on  the  paper  price. 
There  would  thus  be  two  sets  of  prices,  the  paper  prices  of  goods 
sold  for  future  payment  and  the  money  price  of  goods  sold  for  cash. 
The  first  would  be  higher  than  the  second,  and  the  difference — 
refused  by  the  banks — would  be  pocketed  by  the  sellers.  Money 
interest  would  then  reappear  under  a  new  form. 

To  this  Proudhon  would  reply  that  the  clients  of  the  bank,  under 
the  terms  of  their  agreement,  are  debarred  from  taking  any  such 
premiums.  Of  course,  if  they  remained  faithful  to  their  promises 
interest  or  discount  would  be  suppressed ;  but  this  would  result,  not 
from  the  organisation  of  the  Exchange  Bank,  but  because  of  mutual 
agreement.  This  would  be  a  purely  moral  reform  requiring  no 
banking  contrivance  to  aid  it,  but  one  in  which  progress  must 
inevitably  be  very  slow. 

The  Bank  of  Exchange  failing  to  suppress  discount,  or  to  check 
the  right  of  escheat  in  general,  Proudhon's  other  conclusions  fall  to 
the  ground. 

His  theoretical  error  consists  in  his  treating  money  at  one 
moment  as  capital  par  excellence,  at  another  as  a  mere  medium  of 
exchange  having  no  value.  He  forgets  that  money  is  desired  not 
merely  for  purposes  of  exchange,  but  also  as  a  store  of  value,  as  the 
proper  instrument  for  hoarding  and  saving ;  and  although  the 
exchange  notes  may  replace  it  in  one  respect,  they  fail  in  another. 
We  may  increase  the  circulating  media  at  pleasure,  but  we  cannot 
multiply  our  capital.  Money  may  be  replaced  by  goods,  but  this  will 
not  add  a  single  franc  to  the  capital  which  already  exists  in  society, 
of  which  money  itself  is  a  part.  Nor  will  it  lessen  the  superior  value 

1  Proudhon  always  maintained  that  his  reform  merely  consisted  in  transform- 
ing a  credit  sale  into  a  cash  one.  But  he  might  as  well  have  said  that  black  was 
white.  Far  from  giving  mutual  benefit,  the  borrower  will  be  the  one  who  will  gain 
most  advantage.  Elsewhere  he  says  that  to  give  credit  is  merely  to  exchange. 
This  is  true  enough,  but  discount  is  employed  just  to  equalise  different  credit 
transactions. 

E.D.  L 


314      PROUDHON  AND  THE  SOCIALISM  OF  1848 

of  present  as  compared  with  future  goods — a  superiority  which 
gives  rise  to  the  phenomenon  of  interest.  The  only  result  of  multi- 
plying the  exchange  notes  without  increasing  the  amount  of  social 
capital  would  be  to  raise  prices  as  a  whole,  the  price  of  land,  houses, 
and  machinery  as  well  as  the  price  of  consumption  goods.  Capital 
would  be  lent  as  before,  and  being  less  plentiful  the  high  rate  of 
interest  or  rent  would  tend  to  maintain  the  high  level  of  prices,  and 
these  would  in  turn  be  still  further  increased — a  strange  outcome  of 
a  reform  intended  to  lower  them !  Proudhon,  having  exaggerated 
the  evil  effects  of  gold,  now  accepts  Say's  formula  too  literally. 
J.  B.  Say  allowed  himself  to  be  led  into  error  by  his  own  formula 
that  "  Goods  exchange  for  goods,"  and  it  is  interesting  to  note  that 
the  Exchange  Bank  is  the  logical,  though  somewhat  paradoxical, 
outcome  of  the  reaction  against  the  Mercantilist  ideas  concerning 
money  which  can  be  traced  to  Adam  Smith  and  the  Physiocrats. 

This  does  not  imply  that  Proudhon's  idea  is  devoid  of  truth. 
The  false  ideal  of  free  credit  contains  the  germ  of  a  true  ideal,  namely, 
mutual  credit.  The  Bank  of  France  is  a  society  of  capitalists  whose 
credit  is  established  by  the  public  who  accept  their  notes.  They 
really  deal  in  public  credit.  Proudhon  saw  clearly  enough  that 
their  notes  are  ultimately  guaranteed  by  the  public.  The  public  are 
the  true  signatories  of  these  commercial  goods.  Were  the  public 
insolvent  the  bank  would  never  recover  its  advances,  which  really 
constitute  the  security  for  the  bills.  The  shareholders'  capital  is 
only  a  supplementary  guarantee.  The  Comte  Mollien,  the  Financial 
Minister  of  Napoleon  I,  declared  that  in  theory  a  bank  of  issue 
should  be  able  to  operate  without  any  capital.  The  public  lends 
money  to  itself  through  the  intermediary,  the  bank.  Why  not 
operate  without  the  intermediary  ?  Why  not  eliminate  the  entre- 
preneur of  credit  just  as  the  industrial  or  commercial  entrepreneur 
is  eliminated  in  the  case  of  the  co-operative  society  ?  Discount 
would  not  disappear  altogether,  perhaps,  but  the  rate  of  discount 
for  borrowers  would  be  diminished  in  proportion  to  the  extent 
to  which  they  stood  to  gain  as  lenders.  This  is  the  principle  of 
the  mutual  credit  society,  where  the  initial  capital  is  almost 
entirely  superseded,  its  place  being  taken  by  the  joint  liability 
of  the  co-operators.  Proudhon's  initial  conception  seems  to  be 
reducible  to  this  very  simple  idea.1 

1  In  the  Idle  genkrale,  de  la  Revolution  au  XI Xe  Siedc,  p.  198 :  "  The  citizens 
of  France  have  a  right  to  demand  and  if  need  be  to  join  together  for  the  establish- 
ment of  bakehouses,  butchers'  shops,  etc.,  which  will  sell  them  bread  and  meat 
and  other  articles  of  consumption  of  good  quality  at  a  reasonable  price,  taking 


THE  EXCHANGE  BANK  THEORY      315 

It  seems  that  Proudhon  was  merely  following  the  idea  of  a 
co-operative  credit  bank,  just  as  in  other  parts  of  the  work  he  copies 
other  forms  of  co-operation  without  ever  showing  much  sympathy 
for  the  principle  itself.1 

In  addition  to  a  correct  conception  of  the  value  of  mutual  credit, 
there  runs  throughout  his  whole  system  a  more  fundamental  idea 
which  helps  to  distinguish  it  from  other  forms  of  official  socialism 
which  arose  either  before  or  after  his  time.  This  is  his  profound 
belief  in  individual  liberty  as  the  indispensable  motive  of  economic 
activity  in  industrial  societies.  He  realised  better  than  any  of  his 
predecessors  that  economic  liberty  is  a  definite  acquisition  of 
modern  societies,  and  that  every  true  reform  must  be  based  on 
liberty.  He  has  estimated  the  strength  of  spontaneous  economic 
forces  more  clearly  than  anyone  else.  He  has  demonstrated 
their  pernicious  effects,  but  at  the  same  time  he  has  recognised, 
as  Adam  Smith  had  done,  that  this  was  the  most  powerful  lever  of 
progress.  His  passionate  love  of  justice  explains  his  hatred  of 
private  property,  and  his  jealous  belief  in  liberty  aroused  his  hostility 
to  socialism.  Despite  his  famous  formula,  Destruam  et  cedificabo, 
he  destroyed  more  than  he  built.  His  liberalism  rested  on  his 
profound  hold  of  economic  realities,  and  the  social  problem  of  to-day, 
as  Proudhon  clearly  saw,  is  how  to  combine  justice  with  liberty. 

Proudhon's  project  for  an  Exchange  Bank  must  not  be  confused 
with  analogous  schemes  that  have  appeared  either  before  or  after  his 
day.  All  these  schemes  have  a  common  basis  in  a  reform  of  exchange 
as  a  remedy  for  social  inequalities.  Apart  from  this  one  idea  the 
resemblance  is  frequently  superficial,  and  the  economic  bases  differ 
considerably. 

(1)  Proudhon's  idea  has  often  been  contrasted  with  Robert  Owen's 
labour  notes,  and  with  the  scheme  prepared  by  Mr.  Bray  in  1839, 
in  a  work  entitled  Labour's  Wrongs  and  Labour's  Remedy,2  as  well  as 

the  place  of  the  present  chaotic  method,  where  short  weight,  poor  quality,  and 
an  exorbitant  price  seem  to  be  the  order.  For  a  similar  reason  they  have  the 
right  to  establish  a  bank,  with  the  amount  of  capital  which  they  think  fit,  in 
order  to  get  the  cash  which  they  need  for  tteir  transactions  as  cheaply  aa 
possible." 

1  "  Association  avoids  the  waste  of  the  retail  system.  M.  Rossi  recommends  it 
to  those  small  householders  who  cannot  afford  to  buy  wholesale.  But  this  kind 
of  association  is  wrong  in  principle.  Give  the  producer,  by  helping  him  to 
exchange  bis  products,  an  opportunity  of  supplying  them  with  provisions  at 
wholesale  prices,  or,  what  comes  to  the  same  thing,  organise  the  retail  trade  so  as 
to  leave  only  just  the  same  advantage  as  in  the  case  of  the  wholesale  transaction, 
and  '  association  '  will  be  unnecessary."  (Idie  gknkrale,  de  la  Revolution,  p.  92.) 

1  This  system  was  criticised  by  Marx  in  his  Mistre  de  la  Philosophic,  published 


316       PROUDHON  AND  THE  SOCIALISM  OF  1848 

with  the  later  system  outlined  by  Rodbertus.  Proudhon's  circulating 
notes  have  nothing  in  common  with  the  labour  notes  described  by 
these  writers.  The  circulating  notes  represent  commercial  goods 
produced  for  the  purpose  of  private  ^exchange.  Prices  are  freely 
fixed  by  buyer  and  seller,  and  they  bear  no  relation  to  the  labour 
time,  as  is  the  case  with  the  labour  notes.  The  final  result,  doubt- 
less, was  expected  to  be  the  same.  Proudhon  hoped  that  in  this 
way  the  price  of  goods,  now  that  it  was  no  longer  burdened  with 
interest  on  capital,  would  equal  cost  of  production.  This  result 
was  to  be  obtained  indirectly.  The  economic  errors  in  the  two 
cases  are  also  different.  Proudhon's  error  lay  in  his  failure  to  realise 
that  metallic  money  is  a  merchandise  as  well  as  an  instrument  of 
circulation.  The  error  of  Owen,  of  Bray,  and  of  Rodbertus  con- 
sisted of  a  failure  to  see  that  the  price  of  goods  includes  some- 
thing more  than  the  mere  amount  of  labour  which  they  have 
cost  to  produce — an  error  which  Proudhon  at  any  rate  did  not 
commit. 

(2)  Proudhon's  bank  has  also  been  confused  with  other  banks  of 
exchange  which  are  really  quite  different.  The  ideas  underlying 
such  schemes  had  become  prominent  before  Proudhon's  days,  and 
"numerous  practical  experiments  had  been  attempted  along  the  lines 
indicated.  These  banks  aimed,  not  at  the  suppression  of  interest, 
but  at  a  gradual  rapprochement  between  producer  and  consumer, 
the  goods  offered  for  sale  being  bought  by  the  bank,  and  paid  for  in 
exchange  notes  upon  an  agreed  basis  of  calculation.  Buyers  in 
their  turn  would  come  to  the  bank  to  obtain  the  necessaries  of  life, 
paying  for  them  in  exchange  notes.  An  experiment  of  this  kind 
was  made  by  a  certain  Fulcrand  Mazel  in  1829.1  In  this  case  the 

in  1847  (Giard  and  Briere's  edition,  1896,  pp.  92  et  seq.).  A  more  recent  and 
more  complete  exposition  is  given  in  Foxwell's  introduction  to  Anton  Monger's 
The  Eight  to  the  Whole  Produce  of  Labour,  pp.  Ixv,  etc. 

1  Mazel  gave  an  exposition  of  his  scheme  in  a  series  of  pamphlets  written  in 
very  bombastic  language,  but  only  of  very  slight  interest  to  the  economist. 
Another  bank  known  as  Bonnard's  Bank  was  established  at  Marseilles  in  1838, 
and  afterwards  at  Paris.  The  ideas  are  somewhat  similar,  but  much  more 
practical.  Both  branches  are  still  in  active  operation.  Proudhon  refers  to  this 
bank  in  his  Capacite  politique  des  Classes  ouvrieres.  Courcelle-Seneuil  gives  a 
very  eulogistic  account  of  it  in  his  Traite  des  Eanques,  and  in  an  article  in  the 
Journal  des  Sconomistes  for  April  1853.  The  modus  operandi  is  explained  in 
three  brochures,  which  may  be  seen  in  the  Bibliotheque  Kationale.  One  of  these 
is  entitled  Listedes  A  rlicles  disponibles  a  la  JBanque;  the  other  two  describe  the 
mechanism  of  the  bank.  Darimon,  one  of  Proudhon's  disciples,  in  his  work  De  la 
Eeforme  des  Banques  (Paris,  Guillaumin,  1856),  gives  an  account  of  a  large  number 
of  similar  institutions  which  were  founded  during  this  period.  Several  systems 
of  the  kind  have  also  been  discussed  by  M.  Aucuy  in  his  Systemes  socialistes 


THE  EXCHANGE  BANK  THEORY      817 

bank  was  merely  an  entrepot  which  facilitated  the  marketing  of  the 
goods  produced.  Such  a  system  is  open  to  the  objection  that  the 
value  of  the  notes  issued  in  payment  for  goods  would  necessarily 
vary  with  the  fluctuations  in  the  value  of  these  goods  during  the 
interval  which  would  elapse  between  the  time  they  are  taken  in  by 
the  bank  and  their  eventual  purchase  by  consumers.  Proudhon's 
plan  was  to  discount  the  goods  already  bought  or  actually  delivered. 
The  bank  would  only  advance  what  was  actually  promised,  but 
would  make  no  charge  for  accommodation.  Depreciation  could 
only  arise  if  the  buyer  were  insolvent.  It  could  never  result  from 
a  fall  in  price  as  a  result  of  a  diminished  demand  for  the  product. 
Proudhon  renounced  all  dealings  with  solidarity  when  he  dismissed 
MazePs  project.1 

d?  E  change  (Paris,  1907).  But  we  cannot  accept  his  interpretation  of  various 
points. 

Bonnard's  Bank  differs  from  the  others  in  this  way.  The  client  of  the  hank, 
instead  of  bringing  it  some  commodity  or  other  which  may  or  may  not  be  sold 
by  the  bank,  gets  from  the  bank  some  commodity  which  he  himself  requires, 
promising  to  supply  the,  bank  with  a  commodity  of  his  own  production  when- 
ever the  bank  requires  it.  The  bank  charges  a  commission  on  every  transaction. 
Its  one  aim  is  to  bring  buyer  and  seller  together,  and  the  notes  are  simply  bills, 
payable  according  to  the  conditions  written  on  them.  But  they  cannot  be 
regarded  as  substitutes  for  bank  bills.  Cf.  Banque  d'Bchange  de  Marseille,  G. 
Bonnard  et  Cie.,fondie  par  Acte  du  10  Janvier,  1849  (Marseilles,  1849). 

1  "  I  repudiate  Hazel's  system  root  and  branch,"  he  declares  in  an  article  con- 
tributed to  Le  Peuple  of  December  1848  (QSuvres,  voL  xvii,  p.  221).  He  also 
adds  that  when  he  wrote  first  he  had  no  acquaintance  of  any  kind  with  Mauel. 
"  It  was  M.  Maze!  who  on  his  own  initiative  revealed  his  scheme  to  me  and  gave 
me  the  idea."  In  one  of  his  projects,  published  on  May  10, 1848,  Proudhon  seems 
inclined  to  adopt  this  idea,  just  for  a  moment  at  any  rate.  Article  17  seems  to 
hint  at  this.  "  The  notes  will  always  be  exchangeable  at  the  bank  and  at  the 
offices  of  members,  but  only  against  goods  and  services,  and  in  the  same  way 
commodities  and  services  can  always  be  exchanged  for  notes."  (Resume  de  la 
Question  sociale,  p.  41.)  This  article  justifies  the  interpretation  which  Courcelle- 
Seneuil  puts  on  it,  in  his  Traite  dee  Operations  de  Banque  (9th  ed.,  1899,  p.  470), 
and  which  Ott  accepts  in  his  Traite  d'lSconomie  sociale  (1851),  which,  moreover, 
contains  a  profound  analysis  and  some  subtle  criticism  of  Proudhon's  idea.  But  we 
think  that  this  article  was  simply  an  oversight  on  Proudhon's  part ;  for  beyond 
a  formal  refutation  of  Mazel's  id«a  there  is  no  reference  to  it  in  any  of  his  other 
works,  not  even  in  the  scheme  of  the  People's  Bank.  Moreover,  it  seems  to 
contradict  the  statement  that  the  notes  would  be  issued  against  commodities 
which  had  been  actually  sold  and  delivered,  as  well  as  other  articles  of  the  scheme 
— e.g.  Article  30,  dealing  with  buying  and  selling.  It  also  conflicts  with  the  idea 
that  the  discounting  of  goods  is  the  prime  and  essential  operation  of  the  bank. 
In  our  opinion,  Diehl  in  his  book  on  Proudhon  (P.  J.  Proudhon,  Seine  Lehre 
u.  seine  Leben,  vol.  ii,  p.  183)  is  wrong  in  thinking  that  the  Exchange  Bank  would 
issue  notes  against  all  kinds  of  goods  without  taking  the  trouble  to  discover 
whether  they  had  been  sold  or  not. 


318       PROUDHON  AND  THE  SOCIALISM  OF  1848 

(3)  M.  Solvay,  a  Belgian  entrepreneur,  has  recently  elaborated  a 
scheme  of  "  social  accounting."  He  also  proposes  the  suppression 
of  metallic  money  and  the  introduction  of  a  perfect  system  of 
payment.  Here,  however,  the  analogy  ends. 

What  Solvay  proposed  was  the  replacement  of  metallic  money, 
not  by  bank-notes,  but  by  a  system  of  cheques  and  clearing-houses. 
His  plan  owes  its  inspiration  to  the  modern  development  of  the 
clearing-house  system.  Solvay  thought  that  the  system  might  be 
so  extended  as  to  make  the  employment  of  money  entirely 
unnecessary.  To  every  such  clearing-house  the  State  would  hand 
over  a  cheque-book,  covering  a  sum  varying  with  the  amount  of 
real  or  personal  property  which  the  house  possessed.  This  cheque- 
book was  to  have  two  columns,  one  for  receipts,  the  other  for  expen- 
diture. Whenever  any  commodity  was  sold,  the  liquidation  of  debt 
would  be  effected  by  the  buyer's  stamping  the  book  on  the  receipt 
side  and  the  seller's  stamping  it  on  the  expenditure  side.  As  soon 
as  the  total  value  of  these  transactions  equalled  the  initial  sum 
which  the  cheque-book  was  supposed  to  represent  the  book  would 
be  returned  to  the  State  bureau,  where  each  individual  account 
would  be  made  up.  "  In  this  way  everybody's  receipts  and 
expenditure  will  always  be  known  with  absolute  clearness."  * 

The  advantage  of  such  a  system  would  in  the  first  place  consist 
in  the  economy  of  metallic  money.  In  the  second  place  it  would 
furnish  the  State  with  information  as  to  the  extent  of  everybody's 
fortune.  The  State  would  then  be  in  possession  of  the  information 
necessary  for  setting  up  an  equable  scheme  of  succession  duties  which 
would  gradually  suppress  the  hereditary  transmission  of  acquired 
fortune.  Such  gradual  suppression  would  result  in  the  total  extinc- 
tion of  the  fundamental  injustice  of  modern  society,  namely,  the 
inequality  of  opportunity.2  It  would  also  help  the  application  of  that 
other  principle  of  distributive  justice,  namely,  "  to  each  according 
as  he  produces."  The  idea  is  Saint-Simon's  rather  than  Proudhon's. 

The  scope  of  the  proposed  reform  is  quite  clear.  Social  account- 
ing, according  to  Solvay,  is  a  mere  element  in  a  more  general 
conception,  that  of  "  productivism,"  which  in  various  ways  is  to 
result  in  increasing  productivity  to  its  maximum.3 

In  all  this  it  is  impossible  to  see  anything  of  Proudhon's  ideas. 
With  the  exception  of  the  suggestion  of  suppressing  metallic  money 

1  Annales  de  VInstitut  Solvay,  vdL  i,  p.  19. 
«  Ibid.,  p.  25. 

1  Ct  Principe*  d'Orientation  sociale,  a  risumi  of  Solvay's  studies  in  pro 
ductivism  and  accounting  {Brussels,  1904). 


THE  EXCHANGE  BANK  THEORY      319 

the  fundamental  conceptions  are  utterly  different.  M.  Solvay 
makes  no  pretence  to  ability  to  suppress  interest,  and  he  never 
imagines  that  money  is  the  cause  of  interest.  The  cheque  and 
clearing  system  is  a  mere  device  for  facilitating  cash  payment.  It 
has  nothing  in  common  with  the  Proudhonian  system,  whereby 
circulating  notes  are  supposed  to  place  credit  sales  and  cash  payments 
on  an  equal  footing.1 

The  most  serious  objection  to  Solvay's  system  lies  in  the  fact 
that  the  suppression  of  money  as  a  circulating  medium  must  also 
involve  its  suppression  as  a  measure  of  value.  It  seems  difficult  to 
imagine  that  the  universal  cheque  bank  with  no  monetary  support 
would  not  result  in  a  rapid  inflation  of  prices  because  of  the  super- 
abundance of  paper.  But  although  the  particular  process  advocated 
by  Solvay  is  open  to  criticism  there  can  be  no  objection  to  his  desire 
to  diminish  the  quantity  of  metallic  money  or  to  further  the  ideal  of 
equal  opportunity  for  all. 

The  project  was  never  successfully  put  into  practice.  Like  the 
cognate  ideas  of  "  the  right  to  work,"  "  the  organisation  of  labour," 
and  "  working  men's  associations,"  the  idea  of  "  free  credit "  has 
left  behind  it  a  mere  memory  of  a  sudden  check. 

On  January  31,  1849,  Proudhon,  in  the  presence  of  a  notary, 
set  up  a  society  known  as  the  People's  Bank,  with  a  view  to 
showing  the  practicability  of  free  credit.  The  actual  organisation 
differs  considerably  from  the  theoretical  outline  of  the  Exchange 
Bank.  The  Exchange  Bank  was  to  have  no  capital :  the  People's 
Bank  had  a  capital  of  5,000,000  francs,  divided  into  shares  of  the 
value  of  5  francs  each.  The  Exchange  Bank  was  to  suppress 
metallic  money :  the  People's  Bank  had  to  be  content  with  issuing 
notes  against  certain  kinds  of  commercial  goods  only.  The  Exchange 
Bank  was  to  suppress  interest :  the  People's  Bank  fixed  it  at  2  per 
cent.,  expecting  that  it  could  be  reduced  to  a  minimum  of  i  per  cent. 

Despite  these  important  changes  the  bank  would  not  work.  At 
the  end  of  three  months  the  subscribed  capital  was  only  18,000  francs, 
although  the  number  of  subscribers  was  almost  12,000.  Just  at 

1  Although  Solvay's  scheme  seems  very  different  from  Proudhon's,  it  possesses 
features  that  received  the  highest  commendation  from  the  Luxembourg  Commis- 
sion. In  L'Expost  giniral  de  la  Commission  de  Gouvernement  pour  lea  Travailleurs, 
which  appeared  in  Le  Moniteurot  May  6, 1848,  we  read:  "When  in  the  future 
association  has  become  complete,  there  will  be  no  need  for  notes  even.  Every 
transaction  will  be  carried  on  by  balancing  the  accounts.  Book-keepers  will  take 
the  place  of  collecting  clerks.  Money,  both  paper  and  metallic,  is  largely  super- 
fluous even  in  present-day  society."  The  author  then  proceeds  to  outline  a 
scheme  of  clearing-houses. 


320  PROUDHON   AND  THE   SOCIALISM   OF   1848 

that  moment — March  25,  1849 — Proudhon  was  brought  before  the 
Seine  Assize  Court  to  answer  for  two  articles  published  on  January  16 
and  27,  1849,  containing  an  attack  on  Louis  Bonaparte.  He  was 
sentenced  to  three  years'  imprisonment  and  fined  3000  francs.  On 
April  11  he  announced  that  the  experiment  would  be  discontinued, 
and  that  "  events  had  already  proved  too  strong  for  it,"  which 
seemed  to  suggest  that  he  had  lost  faith  in  the  scheme. 

From  that  moment  free  credit  falls  into  the  background,  and 
political  and  social  considerations  obtain  first  place  in  his  later  works. 


IV :   PROUDHON'S  INFLUENCE  AFTER  1848 

IT  is  extremely  difficult  to  follow  the  influence  of  Proudhon's  thought 

after  1848. 

Karl  Marx,  who  was  almost  unknown  in  1848,  became  by  the 
publication  of  his  Kapital  in  1867  practically  the  sole  representative 
of  theoretical  socialism.  Marx's  Miser e  de  la  Philosophic,1  published 
in  1847,  is  a  bitter  criticism  of  the  Contradictions  tconomiques,  and 
shows  how  violently  he  was  opposed  to  Proudhon's  ideas.  To  the 
champion  of  collectivism  the  advocate  of  peasant  proprietorship  is 
scarcely  comprehensible ;  the  theorist  of  class  war  can  hardly  be 
expected  to  sympathise  with  the  advocate  of  class  fusion,  the  revolu- 
tionary with  the  pacificist.2  The  success  of  Marx's  ideas  after  1867 

1  A  hit  at  Proudhon's  Philosophic  de  la  Misere,  which  was  the  sub-title  of  his 
Contradictions  iconomique.8. 

1  In  a  letter  written  to  Karl  Marx  on  May  17,  1846  (Correspondance,  vol.  ii, 
p.  199),  d  propos  the  expression  "  at  the  moment  of  striking,"  which  Marx  had 
employed,  Proudhon  takes  the  opportunity  of  declaring  that  he  is  opposed  to 
all  kinds  of  revolution.  "  You  are  perhaps  still  of  opinion  that  no  reform 
is  possible  without  some  kind  of  struggle  or  revolution,  as  it  used  to  be  called, 
but  which  is  nothing  more  or  less  than  a  shock  to  society.  That  opinion  I  shared 
for  a  long  time.  I  was  always  willing  to  discuss  it,  to  explain  it,  and  to  defend  it. 
But  in  my  later  studies  I  have  completely  changed  my  opinion.  I  think  that 
it  is  not  in  the  least  necessary,  and  that  consequently  we  ought  not  to  consider 
revolution  as  a  means  of  social  reform.  Revolution  means  an  appeal  to  force, 
which  is  clearly  in  contradiction  to  every  project  of  reform.  I  prefer  to  put  the 
question  in  a  different  fashion,  namely,  How  can  we  arrange  the  economic 
activities  of  society  in  sueh  a  fashion  that  the  wealth  which  is  at  present  lost  to 
society  may  be  retained  for  its  use  ?  "  And  in  the  Confessions  d'un  Revolution- 
naire,  p.  61  :  "A  revolution  is  an  explosion  of  organic  forces,  an  evolution 
spreading  from  the  heart  of  society  through  all  its  members.  It  can  only 
be  justified  if  it  be  spontaneous,  peaceful,  and  gradual.  It  would  be  as 
tyrannous  to  try  to  suppress  it  as  to  bring  it  about  through  violence."  See 
M.  Bourguin's  article  on  Proudhon  and  Karl  Marx  in  the  Revue  d'ficonomie 
politique,  1893. 


PROUDHON'S  INFLUENCE  AFTER  1848          321 

cast  all  previous  social  systems  into  the  shade.  Proudhon,  he 
thought,  was  a  mere  petit  bourgeois.  When  the  celebrated  Inter- 
national Working  Men's  Association  was  being  founded  in  London  in 
1864  the  Parisian  workmen  who  took  part  in  it  seemed  to  be  entirely 
under  the  influence  of  Proudhon.  At  the  first  International  Congress, 
held  at  Geneva  in  1866,  a  memorial  was  presented  which  bore  clear 
indications  of  Proudhon's  influence,  and  its  recommendations  were 
adopted.  At  the  following  Congress,  in  1867,  Proudhon's  ideas  met 
with  a  more  determined  resistance,  and  by  the  time  of  the  Congress 
of  Brussels  (1868),  and  that  of  Basle  (1869),  Marx's  influence  had 
become  predominant. 

One  might  even  doubt  whether  the  Proudhonian  ideas  defended 
by  the  Parisian  workmen  in  1866  were  really  those  of  the  Proudhon 
of  1848.  They  seemed  much  more  akin  to  the  thesis  of  his  last 
work,  La  Capacity  politique  des  Classes  ouvrieres,  published  in  1865. 
This  book  was  itself  written  under  the  inspiration  of  a  working  men's 
movement  which  had  arisen  in  Paris  after  1862  as  the  result  of  a 
manifesto  signed  by  sixty  Parisian  workmen.  This  manifesto  had 
been  submitted  to  Proudhon  as  the  best  known  representative  of 
French  socialism.  The  attitude  of  the  French  workmen  at  the 
opening  of  the  "  International,"  then,  was  the  effect  of  a  revival  of 
Proudhonism  as  the  outcome  of  the  publication  of  this  new  volume 
rather  than  a  persistence  of  the  ideas  of  1848.1 

The  revival  was  of  short  duration.  Since  then,  however,  the 
Marxian  ideas  have  been  submitted  to  very  thorough  criticism,  and 
certain  recent  writers  have  displayed  an  entirely  new  interest  in 
Proudhon's  ideas.  These  writers,  chief  among  whom  is  M.  Georges 
Sorel,  combine  a  great  admiration  for  Marx  with  a  no  less  real 
respect  for  Proudhon.  But  even  in  this  case  it  is  difficult  to  speak 
of  the  movement  as  a  revival  of  Proudhon's  ideas.  It  is  rather  a 
new  current  which  owes  its  inspiration  to  syndicalism  and  combines 
French  anarchy  and  German  collectivism.  In  any  case,  it  is  so 
recent  that  we  cannot  yet  determine  its  full  import. 

1  On  this  point  see  Puech,  Proudhon  et  V Internationale  (Paris,  1907);  preface 
by  M.  Andler. 


E.D. 


BOOK  III:  LIBERALISM 

IT  is  time  we  returned  to  the  Classical  writers.  Now  that  the 
combat  had  grown  fierce  among  its  critics,  we  are  anxious  to  know 
what  the  Classical  school  itself  was  doing  to  repel  the  onslaughts  of 
the  enemy.  Its  apparent  quiescence  must  not  mislead  us  into  the 
belief  that  it  was  already  extinct.  Although  the  great  works  of 
Ricardo,  Malthus,  and  Say  were  produced  early  in  the  century, 
it  cannot  be  said  that  economic  literature  even  after  that  period, 
especially  in  England,  had  remained  at  a  standstill.  But  no  work 
worthy  of  comparison  with  the  writings  of  the  first  masters  or  their 
eloquent  critics  had  as  yet  appeared.  Now,  however,  the  science 
was  to  captivate  the  public  ear  a  second  time,  and  for  a  short  period 
at  least  to  unite  its  many  votaries. 

But  the  union  was  no  true  one.  The  Classical  school  itself  was 
about  to  break  up  into  two  camps,  the  English  and  the  French.  In 
no  sense  can  they  be  regarded  as  rivals,  for  they  are  defenders  of  the 
same  cause.  They  are  both  champions  of  the  twin  principles  of 
Liberalism  and  Individualism.  But  while  the  first,  with  John 
Stuart  Mill  as  its  leader,  lent  a  sympathetic  ear  to  the  vigorous 
criticism  now  rampant  everywhere,  which  claimed  that  the  older 
theories  ought  to  yield  place  to  the  new,  the  French  school,  on  the 
other  hand,  with  Bastiat  as  its  chief,  struggled  against  all  innovation, 
and  reaffirmed  its  faith  in  the  "  natural  order  "  and  laissez-faire. 

This  divergence  really  belongs  to  the  origin  of  the  science.  Traces 
of  it  may  be  discovered  if  we  compare  the  Physiocrats  with  Adam 
Smith,  or  J.  B.  Say  with  Ricardo ;  but  it  was  now  accentuated,  for 
reasons  that  we  shall  presently  indicate. 

Our  third  Book  naturally  divides  itself  into  two  parts,  the  one 
devoted  to  the  French  Liberal  school,  the  other  to  the  English. 


CHAPTER  I:  THE  OPTIMISTS 

THE  previous  Book  has  shown  us  the  unsettled  state  of  economic 
science.  It  has  also  indicated  how  the  science  was  turned  from  its 
original  course  by  reverses  suffered  at  the  hands  of  criticism,  socialism, 
and  mt erven tionism,  which  were  now  vigorous  everywhere.  The 

322 


THE  OPTIMISTS  823 

time  had  come  for  an  attempt  to  bring  economic  science  back  into 
its  true  path  and  to  its  old  allegiance  to  the  "  natural  order,"  a 
position  which  it  had  renounced  since  the  days  of  the  Physiocrats 
and  Adam  Smith.  This  was  the  task  more  especially  undertaken 
by  the  French  economists. 

The  attitude  of  the  French  school  is  not  difficult  to  explain,  for 
the  French  economists  found  themselves  faced  by  both  socialism 
and  Protection.  We  must  never  forget  that  France  is  the  classic 
land  of  socialism.1  The  influence  exercised  in  England  by  Owen 
and  in  Germany  by  Weitling  or  Schuster  is  unworthy  of  comparison 
with  the  exalted  role  played  by  Saint-Simon,  Fourier,  or  Proudhon  in 
France.  The  latter  writers  wielded  a  veritable  charm,  not  merely 
over  working  men,  but  also  over  the  intellectuals,  and  on  that 
account  were  all  the  more  dangerous,  in  the  opinion  of  economists. 

French  Protection  was  never  represented  by  such  a  prominent 
champion  as  Germany  had  in  List,  but  it  was  none  the  less  active. 
Protection  in  England  succumbed  after  a  feeble  resistance  to  the 
repeal  movement  led  by  Cobden,  but  in  France  it  was  powerful 
enough  to  resist  the  campaign  inaugurated  by  Bastiat.  It  is  true 
that  Napoleon  III  suppressed  it,  but  it  soon  reappeared,  as  vigorous 
as  ever. 

The  French  school  had  thus  to  meet  two  adversaries,  disguised 
as  one ;  for  Protection  was  but  a  counterfeit  of  socialism,  and  all 
the  more  hateful  because  it  claimed  to  increase  the  happiness  of 
proprietors  and  manufacturers — of  the  wealthy ;  while  socialists  did 
at  least  aim  at  increasing  the  happiness  of  the  workers — of  the  poor. 
Protection  was  also  more  injurious,  for  being  in  operation  its 
ravages  were  already  felt,  whereas  the  other,  happily,  was  still  at 
the  Utopian  stage.  But  in  hitting  at  both  adversaries  at  once  the 
French  school  discovered  that  it  possessed  this  advantage  :  it  was 
free  from  the  reproach  that  it  was  serving  the  interests  of  a  particular 
class,  and  could  confidently  reply  that  it  was  fighting  for  the  common 
good. 

A  war  of  a  hundred  years  can  scarcely  fail  to  leave  a  mark 
upon  the  nation  which  bears  the  brunt  of  it,  and  we  think  that  this 
affords  some  explanation  of  the  apologetic  tendencies  and  of  the 
normative  and  finalistic  hypotheses  for  which  the  French  school 
has  so  often  been  reproached. 

1  This  fact  is  recognised  even  by  German  socialists  themselves.  "  The 
people  who  gave  socialism  to  the  world  even  in  its  earlier  forms  have  immortalised 
themselves,"  says  Karl  Griin,  when  speaking  of  France  just  about  the  time 
that  our  chapter  refers  to.  (Quoted  by  Puech,  loc.  cit.,  p.  57.) 


824  THE  OPTIMISTS 

It  is  necessary  that  we  should  try  to  understand  the  line  of 
argument  adopted  by  the  French  writers  in  defending  the 
optimistic  doctrines  which  they  so  easily  mistook  for  the  science 
itself.  They  argued  somewhat  as  follows  : 

"  Pessimism  is  the  great  source  of  evil.  The  sombre  prophecies 
of  the  pessimists  have  destroyed  all  belief  in  '  natural '  laws  and  in 
the  spontaneous  organisation  of  society,  and  men  have  been  driven 
to  seek  for  better  fortune  in  artificial  organisation.  What  is  especially 
needed  to  refute  the  attacks  of  the  critics,  both  socialists  and 
Protectionists,  is  to  free  the  science  from  the  compromising  attitude 
adopted  by  Malthus  and  Ricardo,  and  to  show  that  their  so-called 
'  laws  '  have  no  real  foundation.  We  must  strive  to  show  that 
natural  laws  lead,  not  to  evil,  but  to  good,  although  the  path 
thither  be  sometimes  by  way  of  evil ;  that  individual  interests  are 
at  bottom  one,  and  only  superficially  antagonistic ;  that,  as  Bastiat 
put  it,  if  everyone  would  only  follow  his  own  interest  he  would 
unwittingly  find  that  he  was  advancing  the  interests  of  all."  In  a 
word,  if  pessimism  is  to  be  refuted  it  can  only  be  by  the  establishment 
of  optimism. 

It  is  true  that  the  French  school  protests  against  the  adjective 
"  optimistic,"  and  refuses  to  be  called  "orthodox."  Its  protests  would 
be  justified  if  optimism  implied  quietism — that  selfish  contentment 
of  the  well-to-do  bourgeois  who  feels  that  everything  is  for  the  best 
in  this  best  of  all  worlds — or  the  attenuated  humanitarianism  of 
those  who  think  that  they  can  allay  suffering  by  kind  words  or  good 
deeds.  It  is  nothing  of  the  kind.  We  have  already  protested 
against  interpreting  laissez-faire  as  a  mere  negation  of  all  activity. 
It  ought  to  be  accepted  in  the  English  sense  of  fair  play  and  of 
keeping  a  clear  field  for  the  combatants.  The  economists  both  of 
the  past  and  of  the  present  have  always  been  indefatigable  wranglers 
and  controversialists  of  the  first  order,  and  they  have  never  hesitated 
to  denounce  abuses.  But  their  optimism  is  based  upon  the  belief 
that  the  prevalence  of  evil  in  the  economic  structure  is  due  to  the 
imperfect  realisation  of  liberty.  The  best  remedy  for  these  defects 
is  greater  and  more  perfect  liberty ;  x  hence  the  title  "  Liberal," 
to  which  the  school  lays  claim.  The  liberty  of  the  worker  is  the 
best  guarantee  against  the  exploitation  of  his  labour  and  the 
reduction  of  wages.  M.  Emile  Ollivier,  the  author  of  the  law  which 
suppressed  combination  fines,  declared  that  freedom  of  combination 
would  put  an  end  to  strikes.  Free  loans  would  cause  the  disappear- 

1  "  So  many  things  have  we  attempted !  How  is  it  that  liberty,  the  easiest 
of  all,  has  never  been  given  a  trial  ?  "  (Bastiat,  Harmonies,  chap.  4,  p.  125.) 


THE  OPTIMISTS  325 

ance  of  usury.  Freedom  of  trade  would  put  an  end  to  the  adultera- 
tion of  goods  and  the  reign  of  trusts.  Competition  would  everywhere 
secure  cheap  production  and  just  distribution.1 

This  optimism,  strengthened  and  intensified,  deepened  their 
distrust  of  every  kind  of  social  reform  undertaken  with  a  view  to 
protecting  the  weak,  whether  by  the  masters  themselves  or  through 
the  intervention  of  the  State.  Liberty,  so  they  thought,  would 
finally  remedy  the  evils  which  it  seemed  to  create,  while  State 
intervention  merely  aggravated  the  evils  it  sought  to  correct.* 

What  seems  still  more  singular  is  their  scant  respect  for  "  associa- 
tionism  "  as  outlined  in  our  previous  chapter.  It  found  just  as 
little  favour  as  State  control.  They  did  not  display  quite  the 
same  contempt  for  it  as  was  shown  by  the  Revolutionists.  It  was 
no  longer  actually  condemned,  and  they  put  forward  a  formal  plea 
for  the  right  of  combination,  in  politics,  in  religion,  industry, 
commerce,  and  labour.  But  they  always  interpreted  it  as  a  mere 
right  of  coalition  or  association  with  a  view  to  protecting  or 
strengthening  individual  activity.  Association  as  an  instrument 
of  social  transformation  that  would  set  up  co-operation  in  place  of 
competition,  and  which  in  the  name  of  solidarity  demanded  certain 
sacrifices  from  the  individual  for  the  sake  of  the  community,  was  not 
to  the  liking  of  the  Liberal  Individualist  school.  Even  the  less 
ambitious  and  less  complete  forms,  such  as  the  co-operative  and 
the  mutual  aid  society,  seemed  to  them  to  be  full  of  illusions  and 
deceptions,  if  not  actually  vicious.3 

The  most  striking  characteristic  of  the  French  school  is  its 
unbounded  faith  in  individual  liberty.  This  distinctive  trait  has 
never  been  lacking  throughout  the  century  and  a  half  that  separates 

1  One  of  the  sections  of  Dunoyer' s  La  Libert^  du  Travail  is  entitled :  "  Of  the 
True  Means  of  remedying  the  Evils  from  which  the  Workers  Buffer,  by  extending 
the  Sphere  of  Competition."  (Book  IV,  chap.  10,  §  18.) 

"  As  a  matter  of  fact,"  says  Dunoyer  elsewhere,  "  this  competition  which 
seems  such  an  element  of  discord  is  really  the  one  solid  bond  which  links 
together  all  the  various  sections  of  the  social  body." 

'  "  Whenever  the  State  undertakes  to  supply  the  wants  of  the  individual, 
the  individual  himself  loses  his  right  of  free  choice  and  becomes  less  progressive 
and  less  human  ;  and  by  and  by  all  his  fellow  citizens  are  infected  with  a  similar 
moral  indifference."  (Bastiat,  Harmonies,  chap.  17,  p.  545.) 

*  Dunoyer  says :  "  You  may  search  the  literature  of  association  as  much 
as  you  like,  but  you  will  never  come  across  a  single  intelligent  discussion  of  an 
equitable  means  of  distribution."  (Libertedu  Travail,  vol.  ii,  p.  397.)  Further, 
he  asserts  that  association  has  damaged  social  even  more  than  individual 
morality,  because  nothing  will  be  considered  lawful  unless  done  by  society  as 
a  whole.  It  is  true  that  in  this  case  he  was  speaking  chiefly  of  corporativs 
association,  but  the  condemnation  has  a  wider  import. 


826  THE  OPTIMISTS 

us  from  the  time  of  the  Physiocrats.  Its  most  eminent  representa- 
tives, while  spurning  the  title  Orthodox  or  Classical,  have  repeatedly 
declared  that  they  wish  for  no  other  name  than  Liberal.1 

It  is  also  marked  by  a  certain  want  of  sympathy  with  the  masses 
in  their  sufferings.  Science,  doubtless,  does  not  make  for  sympathy. 
But  what  we  merely  wish  to  note  is  the  presence  of  a  certain  tendency 
— already  very  pronounced  in  Malthus — to  believe  that  people's 
misfortunes  result  from  their  vices  or  their  improvident  habits.2 
The  Liberal  school  was  quite  prepared  to  extend  an  enthusiastic 
welcome  to  the  teaching  of  Darwin.  He  pointed  out  that  a  necessary 
condition  of  progress  was  the  natural  selection  of  the  best  by  the 
elimination  of  the  incapable,  and  that  the  price  paid  is  not  a  bit  too 
high.  Belief  in  the  virtue  of  competition  led  to  the  glorification  of 
the  struggle  for  life. 

But  the  Liberal  school  failed  to  demonstrate  the  goodness  of  all 
natural  laws  ;  neither  did  it  succeed  in  arresting  the  progress  of  either 
socialism  or  Protection.  The  end  of  the  nineteenth  century  found 
it  submerged  beneath  the  waters  of  both  currents.  Yet  it  never 
once  lost  confidence.  Its  fidelity  to  principle,  its  continuity  of 
doctrine,  its  resolute,  noble  disdain  of  unpopularity,  have  won  for  it 
a  unique  position  ;  and  it  deserves  better  than  the  summary  judgment 
of  foreign  economists,  who  describe  it  as  devoid  of  all  originality, 
or  at  best  as  only  a  pale  reflection  of  the  doctrine  of  Adam  Smith. 

In  this  chapter  we  are  to  study  the  period  when  Liberalism  and 
Optimism  were  at  the  height  of  their  fame.  It  runs  from  1830  to  1850. 
It  was  during  this  epoch  that  the  union  of  political  and  economic 
liberty  took  place.  Henceforth  they  are  combined  in  a  single  cult 
known  as  Liberalism.  Economic  liberty — that  is,  the  free  choice  of 
vocation  and  the  free  exchange  of  the  fruits  of  one's  toil — no  longer 
figured  in  the  category  of  necessary  liberties,  alongside  of  liberty  of 
conscience  or  freedom  of  the  press.  Like  the  others  it  was  one  of 

1  On  the  occasion  of  the  international  gathering  of  economists  at  the  Paris 
Exposition  in  July  1900,  Levasseur,  one  of  the  most  moderate  members  of  the 
Liberal  school,  said :  "  There  is  no  need  to  draw  any  distinction  between  us. 
Liberal  economists  ought  not  to  be  divided  in  this  way.  There  may  be  different 
opinions  on  the  question  of  applying  our  principles,  but  we  are  all  united  on 
this  question  of  liberty.  A  man  becomes  wealthy,  successful,  or  powerful  all 
the  sooner  if  he  is  free.  The  more  liberty  we  have,  the  greater  the  stimulus  to 
labour  and  thought  and  to  the  production  of  wealth."  (Journal  des  Economistes, 
August  15, 1900.) 

*  "  It  is  a  good  thing  to  have  a  number  of  inferior  places  in  society  to  which 
families  that  conduct  themselves  badly  are  liable  to  fall,  and  from  which  they 
can  rise  only  by  dint  of  good  behaviour.  Want  is  just  such  a  helL"  (Dunoyer, 
La  Libert*  du  Travail  p.  409.) 


THE  OPTIMISTS  827 

the  successes  already  achieved  by  democracy  or  civilisation,  and  to 
attempt  to  suppress  it  was  as  vain  as  to  try  to  make  a  river  flow 
backward.  It  was  just  a  part  of  the  wider  movement  towards 
freedom  from  all  servitude. 

The  appearance  of  political  economy  at  the  time  when  the  old 
regime  was  showing  signs  of  disintegration  is  not  without  significance. 
The  Physiocrats,  who  were  the  first  Liberal  Optimists,  were  unjustly 
ignored  and  neglected  by  their  own  descendants,  not  because  of  their 
economic  errors  so  much  as  because  of  their  political  doctrines, 
especially  their  acceptance  of  legal  despotism,  which  seemed  to  the 
Liberals  of  1830,  if  not  an  actual  monstrosity,  at  least  a  sufficiently 
typical  survival  of  the  old  regime  to  discredit  the  whole  Physio- 
cratic  system.1 

Charles  Dunoyer's  book,  which  appeared  in  1845, 2  and  which 
bears  the  significant  title  of  De  la  Liberte  du  Travail,  ou  simple  Expos6 
des  Conditions  dans  lesquelles  les  Forces  humaines  s'exercent  avec  le  plus 
de  Puissance,  exactly  marks  this  era  of  politico-economic  Liberalism. 
But  although  Dunoyer's  book  is  a  eulogy  of  liberty  in  all  its  forms, 
especially  its  competitive  aspects,  the  optimistic  note  is  not  so 
marked  as  it  is  in  another  much  more  celebrated  work  which 
appeared  about  the  same  date — Les  Harmonies  economiques  of 
Bastiat  (1850).  The  Harmonies  and  the  other  works  of  Bastiat 
contain  all  the  essential  traits  of  the  Liberal  doctrine.  His  extreme 
optimism  and  his  belief  in  final  causes  have  been  disavowed  by  a 
great  many  of  the  Liberal  economists,  but  he  remains  the  best 
known  figure  of  the  Optimistic  Liberal  group,  and  possibly  of  the 
whole  French  school. 

Another  economist  whose  name  is  inseparably  linked  with  the 
Optimistic  doctrine,  and  of  whom  we  have  already  made  some 
mention,  is  the  American  Carey.3  In  many  respects  Carey  ought  to 
be  given  first  place,  were  it  only  because  of  his  priority  as  a  writer, 
and  especially,  perhaps,  since  he  accuses  Bastiat  of  plagiarism.  In 
his  treatment  of  certain  aspects  of  the  subject,  such  as  the  question 
of  method,  in  the  logical  consistency  of  his  argument,  and  in  the  scope 
of  his  discussion  of  such  a  problem  as  that  of  rent,  he  displays  a 
marked  superiority.  In  our  exposition  of  Bastiat's  doctrine  we  shall 

1  See  the  discussion  of  the  political  doctrine  of  the  Physiocrats,  pp.  33  et  eeq. 

1  Editions  of  the  same  work  appeared  between  1825  and  1830;  but  the 
volume  was  much  smaller  and  had  a  different  title.  Dunoyer  will  again  engage 
our  attention  towards  the  end  of  this  chapter.  Of.  Villey,  L'CEuvre  iconomique 
de  Dunoyer  (Paris,  1899). 

1  Henry  Charles  Carey  was  born  at  Philadelphia  in  1793,  and  died  in  1879. 
Up  to  the  age  of  forty-two  he  followed  the  profession  of  a  publisher,  retiring  in 


828  THE  OPTIMISTS 

give  to  Carey's  the  attention  which  it  deserves.  OUT  decision  to  give 
Bastiat  and  not  Carey  the  central  position  in  this  chapter  is  due  in 
the  first  place  to  the  consideration  that  we  are  writing  primarily 
for  French  students,  who  will  be  more  frequently  called  upon  to  read 
Bastiat  than  Carey ;  and  in  the  second  place  to  the  fact  that  the 
works  of  the  American  economist  appeared  at  a  time  when  economic 
instruction  scarcely  existed  in  the  United  States,  and  consequently 
his  writings  never  exercised  the  same  influence  as  those  of  the 
French  economist,  which  appeared  just  when  the  war  of  ideas  was 
at  its  fiercest.  Finally,  Carey's  doctrine  is  lacking  in  the  beautiful 
unity  of  conception  of  the  Harmonies,  so  that  alongside  of  the 
advocacy  of  free  competition  among  individuals  is  presented  an 
outline  of  national  Protection.  Thus  we  have  been  forced  to 
divide  our  treatment  of  Carey  into  two  sections.  The  heterogeneous, 
not  to  say  contradictory,  character  of  his  doctrines  accounts  for  his 
appearing  in  two  different  chapters. 

Bastiat,1  both  at  home  and  abroad,  has  always  been  regarded  as 

1335  to  devote  himself  to  economic  studies.  The  three  volumes  of  his  Principles 
yf  Political  Economy  were  issued  in  1837,  1838,  and  1840  respectively.  In  1848 
appeared  The  Past,  the  Present,  and  the  Future,  which  contains  his  theory  of 
rent.  In  1850  his  Harmony  of  Interests,  Agricultural,  Manufacturing,  and 
Commercial,  was  published,  and  in  1858-59  his  Principles  of  Social  Science. 

These  dates  possess  some  importance.  At  the  time  of  the  publication  of  the 
Harmonies  in  1850  Carey  wrote  a  letter  to  the  Journal  des  Sconomistes  accusing 
Bastiat  of  plagiarism.  Bastiat,  who  was  already  on  the  point  of  death,  wrote 
to  the  same  paper  to  defend  himself.  He  admitted  that  he  had  read  Carey's 
first  book,  and  excuses  himself  for  not  making  any  reference  to  it  on  the  ground 
that  Carey  had  said  so  many  uncomplimentary  things  about  the  French  that  he 
hesitated  to  recommend  his  work.  Several  foreign  economists  have  since  made 
the  assertion  that  Bastiat  merely  copied  Carey,  but  this  is  a  gross  exaggeration. 
Coincidence  is  a  common  feature  in  literary  and  scientific  history.  We  have 
quite  a  recent  instance  in  the  simultaneous  appearance  of  the  utility  theory 
in  England  and  France. 

1  Frederic  Bastiat,  born  in  1801  near  Bayonne,  belonged  to  a  family  of  fairly 
wealthy  merchants,  and  he  himself  became  in  turn  a  merchant,  a  farmer  in  the 
Landes  district,  a  justice  of  the  peace,  a  councillor,  and  finally  a  deputy  in  the 
Constituent  Assembly  of  1848.  He  made  little  impression  in  the  Assembly  ; 
but  he  scarcely  had  time  to  become  known  there  before  his  health  gave  way.  He 
died  at  Rome  in  1850,  at  the  age  of  forty-nine. 

Brief  as  was  Bastiat's  life,  his  literary  career  was  shorter  still.  It  lasted  just 
six  years.  His  first  article  appeared  in  the  Journal  des  Economist esin  1844.  Hia 
one  book,  appropriately  called  Lea  Harmonies  iconomiques,  written  in  1849, 
remains  a  fragment.  In  the  meantime  he  published  his  Petits  Pamphlets  and 
his  Sophismes,  which  were  aimed  at  Protection  and  socialism.  He  was  very 
anxious  to  organise  a  French  Free  Trade  League  on  the  lines  of  that  which  won 
such  triumphs  in  England  under  the  guidance  of  Cobden,  but  he  did  not  succeed. 

His  life  was  that  of  the  publicist  rather  than  the  scholar.  He  was  not  a 
bookworm,  although  he  had  read  Say  before  he  was  nineteen,  and  Franklin's 


THE  OPTIMISTS  829 

the  very  incarnation  of  bourgeois  political  economy.  Proudhon, 
Lassalle  in  his  famous  pamphlet  Bastiat  Schulze-Dclitesch,  Cairnes, 
Sidgwick,  Marshall,  and  Bohm-Bawerk  all  think  of  him  as  the 
advocate  of  the  existing  order.  None  of  them  considers  him  a 
scientific  writer.  They  treat  his  writings  as  a  kind  of  amplification 
of  Franklin's  Poor  Richard's  Almanac,  Avhere  apologues  take  the 
place  of  demonstration  and  a  much-vaunted  transparency  of  style 
is  simply  due  to  absence  of  thought. 

Bastiat  deserves  a  juster  estimate.  The  man  who  wrote  that 
"  if  capital  merely  exists  for  the  advantage  of  the  capitalist  I  am 
prepared  to  become  a  socialist,"  or  who  declared  that  "  one  important 
service  that  still  requires  to  be  done  for  political  economy  is  to 
write  the  history  of  spoliation,"  was  not  a  mere  well-to-do  bourgeois. 
It  is  true  that  he  carried  the  "  isms  "  of  the  French  school  to  absurd 
lengths.  An  unkind  fate  decreed  that  his  contribution  should 
mark  the  culminating-point  of  the  doctrine,  to  be  followed  by  the 
inevitable  reaction.  To  the  force  of  that  reaction  he  had  to  bow, 
and  his  whole  work  was  demolished. 

Bastiat's  arguments  against  socialism  are  somewhat  antiquated, 
but  so  are  the  peculiar  forms  of  socialist  organisation  which  he  had 
in  view  when  writing.  This  is  not  true  of  the  arguments  dealing  with 
Protection.  These  have  not  been  entirely  useless.  Though  they 
failed  to  check  the  policy  of  Protection,  they  definitely  invalidated 
some  of  its  arguments.  If  modern  Protectionists  no  longer  speak  of 
the  "inundation  of  a  country  "  or  of  an  "invasion  of  foreign  goods," 
and  if  the  old  and  celebrated  argument  concerning  national  labour  is 
less  frequently  invoked  as  a  kind  of  final  appeal,  we  too  often  forget 
that  all  this  is  due  to  the  small  but  admirable  pamphlets  written  by 

Poor  Richard's  Almanac  soon  afterwards.  He  was  very  enthusiastic  about  the 
merits  of  Franklin's  works,  and  Franklin's  influence  upon  his  writings,  even  upon 
his  personal  appearance  and  behaviour,  is  very  marked.  "  With  his  long  hair, 
his  small  cap,  his  long  frock-coat,  and  his  large  umbrella,  he  seemed  for  all  the 
world  like  a  rustic  on  a  visit  to  town."  (Molinari  in  the  Journal  de&  ficonomistes, 
February  1851.) 

These  biographical  details  should  not  be  lost  sight  of,  especially  by  those 
who  accuse  him  of  lacking  scientific  culture  and  of  being  more  of  a  journalist 
than  an  economist. 

Despite  the  fact  that  he  has  been  severely  judged  by  foreign  economists,  he  is 
still  very  popular  in  France.  His  wit  is  a  little  coarse,  his  irony  somewhat  blunt, 
and  his  discourses  are  perhaps  too  superficial,  but  his  moderation,  his  good 
sense,  and  his  lucidity  leave  an  indelible  impression  on  the  mind.  And  we 
are  by  no  means  certain  that  the  Harmonies  and  the  Pamphlets  are  not  still  the 
best  books  that  a  young  student  of  political  economy  can  possibly  read.  More- 
over, we  shall  find  by  and  by  that  the  purely  scientific  part  of  his  work  is  by 
no  means  negligible. 


330  THE  OPTIMISTS 

Bastiat.  Such  were  The  Petition  of  the  Candle-makers  and  The 
Complaint  of  the  Left  Hand  against  the  Right.  No  one  could  more 
scornfully  show  the  laughable  inconsistency  of  tunnelling  the 
mountains  which  divide  countries,  with  a  view  to  facilitating 
exchange,  while  at  the  same  time  setting  up  a  customs  barrier  at 
each  end  ;  or  expose  the  patent  contradiction  involved  in  guarantee- 
ing a  minimum  revenue  to  the  landed  proprietors  and  capitalists  by 
the  establishment  of  protective  rights,  while  refusing  a  minimum 
wage  to  the  worker.  No  one  has  better  emphasised  the  difficulty 
of  justifying  an  import  duty  as  compared  with  an  ordinary  tax,  for 
a  tax  is  levied  upon  the  individual  for  the  benefit  of  all,  while  a 
duty  is  levied  upon  all  for  the  benefit  of  the  few. 

He  has  not  been  quite  so  happy  in  his  exposition  of  individualism. 
The  problem  has  been  over-simplified  :  individual  and  international 
exchange  have  been  treated  as  if  they  were  on  all  fours.  Analogies, 
more  amusing  than  solid,  are  employed  to  show  that  the  advantages 
of  international  trade  are  greater  if  a  country  has  an  unfavourable 
balance  against  it,  and  that  international  exchange  benefits  poor 
countries  most.1 

The  thesis  of  the  constructive  portion  of  his  work  is  as  follows  : 
"  The  general  laws  of  the  social  world  are  in  harmony  with  one 
another,  and  in  every  way  tend  to  the  perfection  of  humanity." 
A  priori,  however,  are  we  not  confronted  with  rank  disorder  every- 
where ?  To  that  he  replies  in  his  well-known  apologue,  "  Things 
are  not  what  they  seem,"  pointing  out  that  we  cannot  always 
trust  what  we  see,  and  that  what  is  not  seen  is  very  often  true. 
Apparent  antagonisms  on  closer  view  often  reveal  harmonious 
elements.  But  man's  freedom  sometimes  breaks  the  harmony  and 
destroys  the  liberty  of  others.  Especially  is  this  the  case  with 
spoliation,  which  Bastiat  never  attempts  to  justify,  but  denounces 
whenever  he  has  the  chance.  But  around  man  and  within  him  are 
diverse  forces  which  must  lead  him  the  way  of  the  good,  deviate  he 
never  so  often,  and  which  will  finally  and  automatically  re-establish 
the  harmony.  **  My  belief  is  that  evil,  far  from  being  antagonistic 
to  the  good,  in  some  mysterious  way  promotes  it,  while  the  good 
can  never  end  in  evil.  In  the  final  reckoning  the  good  must  surely 
triumph."  2 

It  is  quite  evident  that  this  doctrine  goes  far  beyond  the  con- 

1  On  this  question  of  who  benefits  by  international  trade  see  our  discussion 
of  Mill's  treatment  of  the  problem  (pp.  364-365). 

2  Harmonies,  p.  21.     Our  quotations  are  taken  from  the  tenth  edition  of  the 
(Euvres  completes. 


THE  OPTIMISTS  331 

ception  of  "  natural  laws,"  and  implies  a  belief  in  a  Providential 
order.  Bastiat  never  shrinks  from  this  position.  He  never  misses 
an  opportunity  of  declaring  his  faith  in  language  much  clearer  than 
that  of  the  Physiocrats.  "  God,"  he  writes,  "  has  placed  within  each 
individual  an  irresistible  impulse  towards  the  good,  and  a  never- 
failing  light  which  enables  him  to  discern  it."  * 

Auguste  Comte  has  delivered  an  eloquent  protest  against  the  vain 
and  irrational  disposition  to  think  that  only  the  spontaneous  can 
be  regarded  as  conforming  to  the  "  order  "  of  nature.  Were  this 
the  case  any  practical  difficulty  "  that  presented  itself  in  the  course 
of  industrial  development  could  only  be  met  with  a  kind  of  solemn 
resignation  under  the  express  sanction  of  political  economy."  2 

Even  as  an  exposition  of  the  Providential  order  Bastiat's  faith 
is  not  easy  to  justify.  It  by  no  means  agrees  with  the  Christian 
teaching  on  the  point.  For  we  cannot  forget  that  although  Scripture 
teaches  us  that  both  man  and  nature  were  declared  good  when  first 
created  by  God,  it  also  teaches  that  both  have  been  entirely  perverted 
by  man's  iniquity,  and  that  never  will  they  become  good  of  their 
own  accord,  since  there  is  no  natural  means  of  salvation.8  Christian 
people  are  exhorted  to  kill  the  natural  man  within  them  and  to 
foster  the  growth  of  the  new  man.  Christianity  promises  a  new 
heaven  and  a  new  earth — an  infinitely  more  revolutionary  doctrine 
than  that  of  the  economic  Optimists.  Bastiat's  God  is,  after  all,  just 
"  Le  Dieu  des  bonnes  gens  "  whose  praises  are  sung  by  Beranger. 

What  are  the  facts  of  this  pre-established  harmony  ?  What  are 
its  laws,  and  where  are  they  operative  ?  They  are  in  evidence 
everywhere,  Bastiat  thinks — in  value  and  exchange,  in  the  insti- 
tution of  private  property,  in  competition,  production  and  con- 
sumption, etc.  We  shall  content  ourselves  with  a  consideration 
of  the  circumstances  under  which  Bastiat  thought  it  was  most  clearly 
seen. 

1  "  Economic  phenomena  are  not  without  their  efficient  cause  and  their 
Providential  aim."  (Harmonies,  last  page.) 

"  Looking  at  this  harmony,  the  economist  can  join  with  the  astronomer  and 
the  physiologist  and  say :  Digitus  Dei  est  hie."  (Ibid.,  chap.  10,  p.  39.) 

"  If  everyone  would  only  look  after  his  own  affairs,  God  would  look  after 
everybody's."  (Hid.,  chap.  8,  p.  290.) 

1  Auguste  Comte,  Cours  de  Philosophie  positive,  vol.  iv,  p.  202. 

1  The  liturgy  of  the  Reformed  Church  reads  as  follows  :  "  We  acknowledge 
and  confess  our  manifold  sins."  See  our  chapter  on  Doctrines  that  owe  their 
Inspiration  to  Christianity. 


332  THE  OPTIMISTS 

I :   THE  THEORY  OF  SERVICE-VALUE 

FIRST  of  all  we  have  the  law  of  value,  "  which  is  to  political  economy 
what  numbers  are  to  arithmetic."  * 

Ricardo  taught  that  value  was  determined  by  the  quantity  of 
labour  necessary  for  production.  This  theory  is  entirely  at  one 
with  Bastiat's,  and  he  would  have  felt  no  compunction  about 
inserting  it  in  the  Harmonies,  for  a  theory  of  value  which  showed 
that  every  form  of  property  is  really  based  upon  labour  seemed  to 
accord  with  the  requirements  of  justice.  But  although  Bastiat's 
method  was  almost  exclusively  deductive,  and  as  little  realistic  as 
possible,  he  could  never  content  himself  with  an  explanation  whicfe 
was  all  too  clearly  in  conflict  with  the  facts.  Such  a  theory  could 
never  explain  why  the  value  of  a  pearl  accidentally  discovered 
should  equal  the  value  of  another  laboriously  brought  from  the 
depths  of  the  sea.  Accordingly  he  sought  another  explanation, 
juster,  and  more  in  accordance  with  facts,  than  Ricardo's. 

Carey  effected  just  the  needed  correction  of  the  Ricardian  theory,' 
by  propounding  another  ingenious  explanation,  namely,  that  value 
is  determined,  not  by  the  quantity  of  labour  actually  employed  in 
production,  but  by  the  quantity  of  labour  saved.  This  would 
account  for  those  facts  that  refused  to  fit  in  with  the  Ricardian 
theory,  and  the  chance  pearl  was  no  longer  a  stumbling-block. 
Bastiat  was  evidently  attracted  by  this  theory.2  But  his  satisfaction 
was  by  no  means  complete,  for  it  is  not  quite  clear  how  a  value 
which  is  proportional  to  the  amount  of  labour  saved — that  is,  to 
labour  which  never  has  been  and  never  will  be  undertaken — can  be 
considered  as  an  economic  harmony.  But  a  ray  of  light  illumines 
the  darkness.  The  labour  saved  is  a  kind  of  service  rendered  to  the 
person  who  acquires  the  commodity.  The  long-sought  explanation 
is  found  at  last !  "  Value  is  the  ratio  between  two  exchanged 
services."  8  And,  seeing  that  individual  property  and  private  for- 
tunes represent  sums  of  values,  we  might  say  that  a  person's  property 
is  merely  the  sum  of  the  services  rendered  by  him.  Herein  lies  the 
harmony.  Nothing  better  could  be  wished  for,  and  Bastiat  exults 
in  his  discovery.  Everything  becomes  quite  clear,  every  contradic- 

1  Harmonies,  chap.  5,  p.  140. 

1  "I have  attempted  to  show  that  value  is  based  not  so  much  upon  the 
amount  of  labour  which  a  thing  has  cost  the  person  who  made  it,  as  upon  the 
amount  of  labour  it  saves  the  persons  who  obtain  it.  [He  ought  to  have  acknow- 
ledged his  indebtedness  to  Carey  in  this  matter.]  Hence  I  have  adopted  the 
term  '  service,'  which  implies  both  ideas."  (Ibid.,  chap.  9,  p.  341.) 

•  Ibid.,  chap.  5,  p.  145. 


THE  THEORY  OF  SERVICE- VALUE  833 

tion  is  removed,  every  difficulty  solved,  if  we  take  for  our  starting- 
point  the  crux  of  economic  theory — namely,  why  diamonds  are  con- 
sidered more  valuable  than  water.  The  diamond  is  more  valuable 
simply  because  the  person  who  gives  it  to  me  is  rendering  me  a 
greater  service  than  he  who  merely  gives  me  a  glass  of  water.  This 
was  not  the  case  on  the  Medusan  raft,  but  even  in  that  instance, 
seeing  that  the  service  rendered  was  incalculable,  the  value  must 
have  been  immense. 

Every  solution  propounded  by  economists — utility,  scarcity, 
difficulty  of  acquisition,  cost  of  production,  labour — is  included 
within  this  conception  of  service,  and  "  economists  of  all  shades  of 
opinion  ought  to  feel  satisfied."  "  My  decision  is  favourable  to 
every  one  of  them,  for  they  have  all  seen  some  aspect  of  the  truth ; 
error  being  on  the  other  side  of  the  shield."  1  Moreover,  the  word 
"  service  "  has  the  advantage  of  including,  besides  value  properly 
so  called  (that  is,  the  price  of  goods),  the  price  of  all  productive 
services  such  as  appear  under  the  heads  of  loans,  rent,  discount,  and 
interest — in  short,  "  everything  that  can  be  said  to  render  a  service."  * 

1  Harmonies,  chap.  5,  p.  193. 

"  Socialists  and  economists,  champions  of  equality  and  fraternity,  I  challenge 
you,  however  numerous  you  may  be,  to  raise  even  a  shadow  of  objection  to  the 
legitimacy  of  mutual  service  voluntarily  rendered,  and  consequently  against 
the  institution  of  private  property  as  I  have  defined  it.  With  regard  to  both 
these  considerations,  men  can  only  possess  values,  and  values  merely  represent 
equal  services  freely  secured  and  freely  given."  (Ibid.,  chap.  8,  pp.  265,  268.) 

Had  the  limits  of  this  work  permitted  us  to  speak  of  the  Italian  economists 
we  should  have  had  to  refer  to  Ferrara,  professor  at  Turin  from  1849  to  1858, 
whose  theory  of  value  and  economic  harmony  link  him  to  his  contemporaries 
Carey  and  Bastiat.  The  whole  economic  edifice,  according  to  Ferrara,  was 
built  upon  cost  of  production.  The  value  of  a  commodity  is  not  measured 
by  the  amount  of  labour  which  it  really  has  cost  to  produce,  but  by  the  amount 
of  labour  that  would  be  required  to  produce  another  similar  commodity,  or, 
if  the  commodity  in  question  be  absolutely  limited  in  quantity,  such  as  is  the 
case  with  an  old  work  of  art,  by  the  labour  necessary  to  produce  a  new  one 
that  would  satisfy  the  same  need  equally  well — an  application  of  the  principle 
of  substitution  which  had  not  been  formulated  when  Ferrara  wrote.  The 
progress  of  industry  gradually  reduces  the  cost  of  labour  and  dispenses  with 
human  effort ;  hence  harmony. 

Everything,  including  the  earth  and  its  products,  even  capital,  are  subject 
to  this  same  law,  and  a  gradual  diminution  of  rent  and  a  lowering  of  the  rate 
of  interest  are  thus  assured. 

Ferrara 's  principal  writings  consist  of  prefaces  to  Italian  translations  of  the 
works  of  the  chief  economists.  They  were  published  in  a  collection  known  as 
Biblioleca  ddV  Economista  (Turin,  1850-70,  26  vols.). 

1  Harmonies,  chap.  7,  p.  236.  The  controversy  between  Bastiat  and  Proudhon 
in  1849  concerning  the  legitimacy  of  interest  was  published  under  the  title  of 
Oratuiti  du  Crtdii,  but  the  argument  is  scarcely  worth  examining  here.  Bastiat's 


334  THE  OPTIMISTS 

One  cannot  help  smiling  at  Bastiat's  naive  exultation,  for  he 
never  realises  that  his  formula  is  so  comprehensive  and  includes 
everything  within  itself  simply  because  it  is  an  empty  form — a  mere 
passe-partout.  It  really  amounts  to  saying  that  value  depends  upon 
desirability,  and  we  are  not  so  much  farther  on  after  all.1  On 
closer  view,  it  even  lacks  that  apologetic  tone  which  evidently 
attracted  Bastiat  to  it.  It  legitimises  neither  value  nor  property, 
and  even  if  it  did  it  would  simply  be  by  the  help  of  a  hypocritical 
formula,  for  the  word  "  service  "  gives  rise  to  the  belief  that  all  value 
implies  a  benefit  for  those  who  receive  it  and  a  virtue  in  those  who 
give  it.  But  very  frequently  it  is  nothing  of  the  kind.  The  owner 
of  a  house  or  of  a  piece  of  land  in  the  city  of  London  which  is  let 
or  sold  at  a  fabulous  price,  the  capitalist  who  lends  money  to  a 
needy  borrower  at  a  usurious  rate,  or  the  politician  even  who  in 
return  for  an  enormous  bribe  secures  some  financial  concession, 
cannot  be  said  to  be  rendering  any  real  service,  for  all  these  have 
either  been  solicited  or  demanded,  or  perhaps  even  extorted  under 
pressure.  Such  abnormal  rates  of  discount,  interest,  or  rent  can 
find  no  place  in  Bastiat's  formula.  From  a  moral  and  ethical  point 
of  view  it  is  equally  futile.  It  is  a  mere  mask  which  affords  protection 
as  well  to  the  worst  exploiter  as  to  the  honest  tradesman  :  all  are 
thrown  promiscuously  into  the  "  universal  harmony."  * 

argument  is  based  upon  the  supposition  that  the  person  who  lends  money 
performs  some  service  or  other,  and  that  the  service,  whenever  given,  should  be 
paid  for ;  in  other  words,  he  maintains  that  capital  is  productive.  A  plane 
means  more  planks  produced,  and  it  is  only  just  that  the  owner  of  the  plane 
should  get  some  of  them.  Proudhon  replies  that  he  does  not  deny  the  legitimacy 
of  interest  under  present  conditions,  but  that  interest  itself  is  just  a  historical 
category — to  use  a  phrase  that  only  became  current  after  Proudhon's  time — and 
that  it  will  be  quite  unnecessary  under  the  new  regime.  The  Exchange  Bank  was 
to  be  the  parent  of  the  new  order.  The  two  combatants  never  really  come  to 
blows.  They  keep  on  arguing  about  nothing.  The  result  is  that  this  discussion 
is  very  trying  and  brings  little  honour  to  either. 

1  "  The  relative  importance  of  any  service  must  vary  with  the  circumstances. 
This  will  depend  upon  its  utility,  and  the  number  of  people  who  are  willing  to 
give  the  amount  of  labour,  of  ability  or  training  necessary  to  produce  it,  as 
well  as  the  amount  of  labour  which  it  will  save  us. "  (Harmonies,  chap.  6,  p.  146. ) 

1  Bastiat  himself  was  obliged  to  recognise  this.  "  I  have  not  taken  the 
trouble  to  ask  whether  all  these  services  are  real  and  proper  or  whether  men  are 
not  sometimes  paid  for  services  which  they  never  give.  The  world  is  full  of 
such  injustices."  (Ibid.,  chap.  6,  p.  167.) 

But  if  the  world  is  full  of  people  who  are  paid  for  services  which  they  have 
never  given  or  for  merely  imaginary  and  improper  work,  what  is  the  use  of 
speaking  of  value  and  property  as  if  they  were  founded  upon  service  rendered  ? 

See  Gide's  article  on  La  Notion  de  la  Valeur  dans  Bastiat,  in  the  Revue 
d' Economic  politique,  1887. 


THE  LAW  OF  FREE  UTILITY  AND  RENT       335 

Despite  the  justness  of  these  criticisms,  and  although  Bastiat's 
attempt  to  explain  value  by  employing  the  term  "  service  "  must 
be  regarded  as  futile,  the  word  has  not  remained  a  mere  ingenious 
epithet.  On  the  contrary,  it  has  won  for  itself  a  permanent  place 
in  economic  terminology.  We  shall  again  meet  with  it  in  the 
vocabulary  of  that  school  which  prides  itself  upon  the  exactness  of 
its  method,  namely,  the  Hedonistic  and  Mathematical  school.  These 
later  writers  constantly  make  use  of  the  term  "  productive  services," 
and  would  find  it  hard  to  discover  another  word  having  a  suffi- 
ciently wide  connotation.1  It  is  true  that  the  word  "  service  "  with 
all  the  noble  associations  of  unselfish  interest  and  professional  honour 
which  cling  to  it  (compare  the  phrase  "  his  Majesty's  service  "),  may 
lead  us  astray  as  to  the  economic  arrangements  of  society,  and  that 
a  recollection  of  the  less  distinguished  uses  of  the  term  may  cause 
us  to  doubt  the  wisdom  of  Bastiat's  choice.  Still,  it  is  the  best  that 
we  can  imagine  when  speaking  of  the  society  of  the  future.  It  is 
employed  in  the  same  sense  as  Auguste  Comte  used  the  term  "  social 
function,"  or  as  the  equivalent  of  Marshall's  "  economic  chivalry."  ' 
In  attempting  to  present  to  ourselves  the  society  of  the  future,  or  at 
least  the  society  of  our  dreams,  we  must  hope  that  the  present 
incentive  to  economic  activity,  which  is  merely  the  desire  for  profit, 
will  gradually  give  place  to  the  idea  of  social  service.  When  that 
day  dawns  a  statue  ought  to  be  erected  to  the  memory  of  Bastiat. 


II :  THE  LAW  OF  FREE  UTILITY  AND  RENT 

RICARDO'S  law  of  rent  was  the  optimist's  nightmare.  Should  it  by 
any  chance  prove  true,  then  the  institution  of  property  must  be 
abandoned  altogether,  and  victory  must  lie  with  the  socialists, 
whom  the  economists  regarded  as  somewhat  of  a  social  nuisance. 
It  was  necessary,  then,  at  all  costs,  to  show  that  this  law  had  in 
reality  no  foundation,  and  with  this  end  in  view  Bastiat  attempts 
to  defend  the  paradox  that  nature  or  land  gratuitously  gives  its 
products  to  all  men.  But  must  we  really  say  that  corn  and  coal, 
the  products  of  soil  and  mine,  literally  do  not  pay  for  the  trouble  of 
getting  them  ?  In  other  words,  have  they  no  value  ?  Bastiat 
replies  that  they  doubtless  possess  some  value,  but  that  the  price 
paid  for  them  does  not  cover  the  natural  utility  of  those  products. 

1  J.  B.  Say  had  already  employed  the  term  "  service  "  without  giving  it  any 
normative  significance,  simply  using  it  to  distinguish  between  wealth  which 
consists  of  acts  and  wealth  which  consists  of  material  products. 

4  Social  Possibilities  of  Economic  Chivalry,  in  Economic  Journal,  March  1907, 


336  THE  OPTIMISTS 

It  merely  covers  cost  of  production,  and  is  only  just  sufficient  to 
reimburse  the  proprietor  for  the  expense  incurred. 

Every  product  contains  two  layers  of  superimposed  utilities. 
The  one  is  begot  of  onerous  toil  and  must  be  paid  for.  It  constitutes 
what  we  call  value.  The  other,  which  is  thrown  into  the  bargain, 
is  a  gift  of  nature,  and  as  such  is  never  paid  for.  This  lower  stratum, 
though  it  is  of  considerable  importance,  is  ignored  simply  because  it 
is  not  revealed  in  price.  It  is  invisible  because  it  is  free. 

But  whenever  a  commodity  is  free,  like  air,  light,  or  running 
water,  it  is  the  common  possession  of  everybody.  The  same  idea 
may  be  expressed  by  saying  that  below  the  apparent  layer  of  value 
which  constitutes  individual  property  there  lies  an  invisible  layer 
of  common  property  which  benefits  everybody  alike.  "  What 
Providence  decreed  should  be  common  has  remained  so  throughout 
the  whole  history  of  human  transactions." 

"  This,"  says  Bastiat,  "  is  the  essential  law  of  social  harmony." 
The  proprietor,  who  in  the  Ricardian  theory  figures  as  a  kind  of 
dragon,  jealously  guarding  the  treasures  of  national  wealth,  which 
can  only  be  enjoyed  on  payment  of  a  fine,  or  who  in  Proudhon's 
passionate  invectives  is  denounced  as  an  interceptor  of  the  gifts  of 
God,  appears  to  Bastiat  as  a  mere  intermediary  between  nature  and 
consumer.  He  is  like  a  good  servant  who  draws  water  from  a 
common  fount,  and  receives  payment,  not  for  the  water  drawn,  but 
solely  for  the  trouble  of  drawing  it.1 

But  there  is  a  still  greater  degree  of  harmony.  Of  the  two 
elements — the  onerous  and  the  gratuitous — which  enter  into  the 
composition  of  all  forms  of  wealth,  the  former  gradually  tends  to 
lose  its  importance  relatively  to  the  latter.  It  is  a  general  law  of 
industry  that  as  invention  progresses  the  human  effort  necessary  to 
obtain  the  same  satisfaction  diminishes.  New  labour  is  almost 
always  more  productive  than  old,  and  this  is  true  with  regard  to  all 

1  "And  I  also  declare  that  you  have  not  intercepted  any  of  the  gifts  of 
God.  It  is  true  that  you  received  them  free  out  of  nature's  hand.  But  it  is 
equally  true  that  you  have  handed  them  on  freely,  reserving  nothing  for  yourself. 
Fear  not,  but  live  in  peace  and  freedom  from  every  qualm."  (Harmonies, 
chap.  8,  p.  257.) 

"  Coal  is  free  for  everyone.  There  is  neither  paradox  nor  exaggeration  in 
that.  It  is  as  free  as  the  water  of  the  brook,  if  we  only  take  the  trouble  to  get 
it,  or  pay  others  for  getting  it  for  us."  (Ibid.,  chap.  10.)  Bastiat  would  not 
regard  the  shareholders'  dividends  as  payments  for  the  trouble  which  the  share- 
holders have  taken  in  getting  the  coal.  The  dividends  simply  pay  for  the  trouble 
taken  to  save  the  money  which  made  the  exploitation  possible. 

Say  spoke  of  free  natural  agents.  What  he  meant  to  refer  to  was  such 
natural  commodities  as  air  and  water,  which  are  at  the  disposal  of  everyone. 


THE  LAW  OF  FREE  UTILITY  AND  RENT       837 

products,  whether  corn  or  coal,  steel  or  cotton.  It  is  true  not  only  of 
the  products  of  the  land,  but  also  of  the  land  itself.  The  cost  of 
clearing  new  land  is  diminishing,  just  as  the  expense  of  making  new 
machinery  is  decreasing.  The  natural  utility,  on  the  contrary,  is 
never  diminished.  Corn  has  to-day  exactly  the  same  utility  as  it 
had  on  the  morrow  of  the  Deluge. 

Property  being  nothing  more  than  a  sum  of  values,  every 
diminution  of  value  must  be  interpreted  as  a  constant  restriction  of 
the  rights  of  property. 

Hence  this  result,  "  which  reveals  a  most  important  fact  for  the 
science,  a  fact,  if  I  mistake  not,  as  yet  unperceived,"  x  namely, 
that  in  every  progressive  society  common  or  gratuitous  utility  never 
stops  growing,  while  the  more  arduous  portion,  which  is  usually 
appropriated,  gradually  contracts.  Present  society  is  already 
communistic,  and  is  becoming  more  so  every  day. 

The  idea  is  indeed  an  attractive  one.  Individual  property  is  like 
a  number  of  islands  surrounded  by  a  vast  communal  sea  which  is 
continually  rising,  fretting  their  coasts  and  reducing  their  areas. 
When  labour  has  become  all-powerful  and  when  science  has  dispensed 
with  effort  the  last  islet  of  property  will  sink  beneath  the  wave  of 
free  utility.  And  so  Bastiat  triumphantly  exclaims :  "  You  com- 
munists dream  of  a  future  communism.  Here  you  have  the  actual 
thing.  All  utilities  are  freely  given  by  the  present  social  order 
provided  we  facilitate  exchange."  2 

Bastiat,  usually  so  logical,  seems  inclined  to  be  sophistical  here. 
If  we  seek  beneath  this  brilliant  demonstration  we  shall  merely  find 
the  statement  that  rent  is  non-existent  because  the  value  of  com- 
modities— including  all  natural  products — can  never  exceed  cost  of 
production.  This  cost  of  production  is  being  continually  lowered, 
and  so  the  value  of  goods  must  be  falling. 

But  the  statement  requires  proof.  There  is  nothing  to  show  how 
the  price  of  natural  goods  under  the  influence  of  competition  would 
tend  to  fall  to  the  level  of  cost  of  production — still  less  to  the 
minimum  level.  There  is  no  refutation  either  of  the  differential  or 
monopolistic  theory  of  rent.  There  is  doubtless  this  much  truth  in 
it :  nature  does  not  create  value,  nor  does  it  demand  payment  for 
it.  No  one  would  to-day  say  that  a  single  cent  of  the  price  of  corn 
or  coal  was  meant  as  payment  for  the  alimentary  properties  of  the 
one  or  the  calorific  capacity  of  the  other.  But  although  it  is  true 
that  nature  asks  nothing  in  return,  it  is  not  correct  to  say  that  the 
landowner  demands  nothing  except  payment  for  trouble  and 
1  Harmonies,  chap.  8,  p.  256.  •  Ibid.,  chap.  5,  p.  142. 


338  THE  OPTIMISTS 

expenditure  incurred.  And  this  extra  gain  he  never  relinquishes 
unless  under  pressure  of  competition.  But  this  very  seldom  happens, 
and  economic  theorists  have  to  be  content  merely  with  showing  how 
the  sale  price  usually  exceeds  the  cost  of  production,  and  how  this 
excess  is  variously  known  as  rent,  profits,  or  surplus  value. 

Bastiat  was  fully  conscious  of  the  weakness  of  his  argument. 
He  saw  quite  clearly  that  possession  of  a  suitable  piece  of  land  in 
the  Champs-Elysees  would  earn  something  more  than  mere  payment 
for  labour  and  outgoings.  It  is  then  that  he  takes  refuge  in  his 
theory  of  value,  and  attempts  to  show  that  the  proprietor  will  never 
draw  more  than  the  price  of  the  service  rendered.  This  may  be 
true.  But  the  mere  fact  of  possessing  a  natural  source  of  wealth 
permits  of  the  raising  of  the  price  of  these  goods  a  great  deal,  and 
then  what  becomes  of  community  of  interests,  and  of  the  theory 
that  the  goods  are  handed  on  by  the  proprietor  free  of  any  charge  ? 

How  superior  is  Carey's  theory,  both  in  its  scientific  value  and  in 
its  social  import !  Carey  follows  Ricardo  step  by  step,  whereas  it 
seems  that  Bastiat  had  only  a  very  imperfect  acquaintance  with  the 
Ricardian  theory.1  In  reply  to  the  statement  that  the  value  of  corn 
rises  progressively  because  the  more  fertile  lands  are  occupied  first, 
and  the  less  fertile  have  to  be  utilised  afterwards,  Carey  points  out 
that,  on  the  contrary,  cultivation  begins  with  the  poorer  land  first, 
and  that  the  richest  is  the  last  to  be  cultivated.  The  consequence 
is  just  the  reverse  of  what  Ricardo  predicted.  As  production 
increases,  the  price  of  corn  will  be  lowered.  The  process  of  reasoning 
by  which  this  reversal  of  the  order  of  cultivation  is  demonstrated  is 
very  interesting.  The  domestication  of  land,  if  the  phrase  be 
permissible,  like  the  utilisation  of  all  natural  forces,  takes  place 
according  to  the  inverted  order  of  their  strength.  Animals  are 
domesticated  before  man  harnesses  wind  or  water,  and  water  and 
wind  are  employed  before  there  is  any  thought  of  vapour  or  electricity. 
The  same  is  true  of  land.  Fertile  land  in  its  natural  state  is  either 

1  Bastiat  does  not  seem  to  have  studied  rent.  The  chapter  of  the  Har- 
monies on  this  subject  was  never  completed.  Fontenay,  one  of  his  disciples, 
wrote  a  brilliant  book  called  Du  Revenu  fancier  (1854),  which  is  almost  forgotten 
to-day.  He  attempted  to  show : 

(1)  That  Ricardian  or  differential  rent  would  not  exist  were  all  the  land 
equally  fertile  and  suitably  cultivated. 

(2)  That  it  is  incorrect  to  speak  of  the  rent  of  natural  fertility,  as  Adam  Smith 
and  the  Physiocrats  did,  if  all  utility  (and  not  merely  value)  is  the  product  of 
human  labour.     A  fish,  a  grape,  a  grain  of  wheat,  a  fat  ox,  all  of  them  have 
been  created  by  human  industry.     Nature  is  for  ever  incapable  of  doing  this. 
This  is  quite  true  if  we  say  nature  alone,  but  it  is  equally  true  of  labour  taken 
by  itself. 


THE  LAW  OF  FREE  UTILITY  AND  RENT       339 

overrun  with  vegetation,  which  must  be  grubbed  up,  or  is  covered 
with  water,  which  must  be  drained  off.  "  Rich  land  is  the  terror  of 
the  emigrant."  a  Its  virgin  forests  must  be  felled,  its  wild  animals 
destroyed,  its  marshes  drained,  and  its  pestilential  miasmas  rendered 
innocuous  if  it  is  not  to  become  a  mere  graveyard.  And  not  until 
several  generations  have  given  of  their  toil  will  it  be  of  much  use. 
Rather  than  undertake  the  task  the  earliest  emigrant  seeks  the  lighter 
soils  of  the  hill-side,  which  are  better  adapted  to  his  feeble  means,  as 
well  as  safer  and  more  easily  defended. 

That  this  theory  is  well  founded  may  be  very  clearly  seen  if  we 
watch  the  progress  of  cultivation  or  the  colonisation  of  new  lands, 
or  glance  at  the  general  history  of  civilisation.  Men  group  them- 
selves in  villages  on  the  higher  levels  or  build  their  castles  on  the 
slopes  of  the  hills,  and  only  descend  slowly  and  carefully  into  the 
lower  plains.  How  many  are  the  localities  in  France  where  the  new 
town  may  be  seen  overspreading  the  plain  close  to  the  old  city 
which  still  crests  the  hill !  The  various  national  gods — Hercules, 
for  example,  who  stifled  the  hydra  of  Lerna  in  his  arms  and  shot  the 
birds  of  Stymphalus's  pool  with  his  arrows — are  in  all  probability 
just  the  men  who  first  dared  break  up  the  alluvial  soils. 

This  theory,  again,  is  open  to  the  same  objection  as  Ricardo's. 
It  applies  to  some  cases  only,  and  under  certain  conditions.  Ricardo's 
theory  explained  the  facts  relative  to  England,  where  population 
presses  heavily  upon  the  limited  area  of  a  small  island  already 
well  occupied.  Carey's  theory  is  equally  well  adapted  to  an 
immense  continent,  with  a  thinly  scattered  population,  occupying 
only  a  few  cultivated  islets  amid  the  vast  ocean  of  virgin  forest 
and  prairie.  The  two  theories  are  not  contradictory.  They  apply 
to  two  different  sets  of  conditions,  or  to  successive  phases  of  economic 
evolution.  And  seeing  that  Ricardo's  applies  to  the  more  advanced 
stage  of  civilisation,  it  certainly  ought  to  have  the  last  word.  If 
Carey  were  writing  now  he  would  probably  express  himself  somewhat 
differently,  for  it  is  no  longer  true  even  of  the  United  States  that 
the  more  fertile  lands  are  still  awaiting  cultivation.  Only  the  poorer 
and  the  more  arid  plains  remain  uncultivated,  and  here  dry  farming 
has  to  be  resorted  to.  So  that  even  in  the  "  Far  West "  Ricardo's  theory 
is  closer  to  the  facts  than  Carey's.  Rents  are  rising  everywhere, 
and  not  a  few  American  millionaires  owe  their  fortunes  to  this  fact.8 

1  Carey,  Principles  of  Social  Science. 

1  Even  in  Algeria,  for  example,  where  Carey's  theory  was  at  first  true,  now 
that  the  fertile  plain  of  the  Mitidja  has  been  cultivated  by  two  generations  of 
colonists  it  is  certain  that  there  is  only  second-class  land  available. 


340  THE  OPTIMISTS 

It  is  just  possible  that  Bastiat  had  some  knowledge  of  Carey's 
theory,  for  the  theory  is  outlined  in  The  Past,  the  Present,  and  the 
Future,  published  by  Carey  a  little  before  Bastiat's  death,  as  well  as 
in  his  Social  Science,  which  appeared  ten  years  later.  At  any  rate, 
let  us  render  thanks  to  both  of  them  for  the  suggestive  thought  that 
as  human  power  over  nature  increases,  effort,  difficulty,  and  value, 
which  is  the  outcome  of  difficulty,  will  disappear,  and  that,  conse- 
quently, the  sum  total  of  real  wealth  at  the  disposal  of  everyone  will 
increase,  but  that  the  poor  will  be  those  who  will  benefit  most.1 


Ill :   THE  RELATION  OF  PROFITS  TO  WAGES 

THE  law  of  rent  was  not  the  only  discordant  note.  That  other  law 
which  stated  that  profits  vary  inversely  with  wages  was  also 
dissonant  and  needed  refuting.  Bastiat  emphasises  the  contrast 
between  it  and  his  new  law  of  harmony,  according  to  which  the 
interests  of  capital  and  labour  are  one,  their  respective  shares 
increese  together,  and  the  proportion  given  to  labour  grows  more 
rapidly  even  than  capital's.2 

That  is  the  conclusion  which  Bastiat  wishes  to  illustrate  by 
means  of  the  following  table  : 

Total  Product  Capital's  Share            Labour's  Share 

First  period      .         .         1000  500    (50  per  cent.)     500  (50  per  cent.) 

Second  period  .         .        2000  800    (40       „        )  1200  (60      „        \ 

Third  period    .         .         3000  1050    (35       „        )  1950  (65      „        ) 

Fourth  period .         .         4000  1200    (30       „        )  2800  (70      „        ) 

This  law  he  speaks  of  as  "  the  great,  admirable,  comforting, 
necessary,  and  inflexible  law  of  capital." 

The  proof  is  very  simple — too  simple,  perhaps.  It  rests  entirely 
upon  the  law  concerning  the  lowering  of  the  rate  of  interest,  noted 
by  Turgot  and  other  economists  long  before  Bastiat's  time.  If 
capital,  instead  of  asking  5  per  cent.,  only  demands  3  per  cent.,  then 
its  share  is  diminished,  and  any  further  diminution  of  its  share 
must  mean  an  increase  of  the  proportion  available  for  labour. 

1  "  Wealth  consists  of  the  right  to  command  the  services  of  nature,  which  are 
always  free."  (Carey,  Principles  of  Social  Science,  vol.  i,  chap.  13.) 

"As  man's  power  over  nature  grows,  his  power  over  his  fellow-men  seems  to 
dwindle  and  equality  becomes  possible."  (Ibid.,  vol.  iii,  p.  122.) 

Compare,  for  example,  the  relative  equality  of  comfort  enjoyed  by  those 
who  travel  by  rail  irrespective  of  class  distinctions  (which  are  only  to  be  found 
in  some  countries)  with  the  former  method  of  travelling  by  post-chaise. 

1  "  Capitalists  and  workers,  don't  look  at  one  another  with  an  air  of  defiance 
and  vengeance."  (Harmonies,  p.  252.) 


THE  RELATION  OF  PROFITS  TO  WAGES        341 

But  a  relative  diminution  of  this  kind  will  not  prevent  capital 
drawing  an  absolutely  greater  share,  provided  the  total  produce  goes 
on  increasing,  as  is  the  case  in  every  progressive  community.  Its 
total  share,  though  on  the  increase,  may  be  decreasing  relatively  to 
the  share  which  goes  to  labour.  For  example,  the  total  product 
may  be  tripled,  capital's  share  having  doubled  in  the  meantime, 
while  labour's  portion  is  quadrupled.  Unfortunately  this  is  a 
purely  sophistical  argument.  The  figures  given  in  the  table  are 
simply  invented  to  meet  the  needs  of  the  case.  Even  the  universality 
of  the  law  concerning  the  lowering  of  the  rate  of  interest  is  open  to 
dispute.  Economic  history  seems  to  point  to  a  series  of  periodic 
oscillations  of  the  rate,  and  quite  recently  it  has  risen  very  con- 
siderably. 

The  so-called  "  law  "  becomes  more  than  doubtful  if,  following 
Bastiat,  we  include  under  the  term  interest,  not  merely  net  interest, 
but  also  profits  and  dividends  and  all  kinds  of  returns  from  capital. 

But,  even  admitting  that  such  a  law  is  thoroughly  established, 
does  that  prove  that  capital's  share  is  decreasing  ?  A  lowering  of 
the  rate  of  interest  cannot  affect  the  capital  already  invested  in 
factories,  mines,  railways,  State  funds,  etc.  The  latter  will  not  draw 
a  penny  less,  and  a  fall  in  the  rate  of  interest  will  increase  the  value 
of  all  old  capital.  Every  capitalist  knows  this  and  speculates  on 
the  chance  of  its  happening.1 

Only  in  the  case  of  new  capital,  then,  will  a  lower  rate  of  interest 
reduce  the  capitalist's  share.  If  by  any  chance  this  new  capital 
should  prove  less  productive  than  the  old  it  may  then  happen  that 
the  reduced  rate  of  interest  will  mean  an  equal  or  even  a  greater 
rise  in  the  remuneration  of  labour.  This  is  quite  a  probable 
contingency,  and  the  proof  advanced  by  economists  who  believe  in 
a  gradual  lowering  of  the  rate  of  interest  is  just  this  very  fact  that 
new  capital  is  generally  less  productive  than  old. 

In  short,  the  problem  presented  by  the  rate  of  interest,  implying 
as  it  does  a  certain  connection  between  the  value  of  the  capital  and 
the  value  of  the  revenue,  is  entirely  different  from  the  question  as  to 
what  share  of  the  produce  will  eventually  fall  to  the  lot  of  the 
capitalist  and  what  to  the  workers.2 

1  A  lowering  of  the  rate  of  interest  from  5  to  3  per  cent,  means  that  what 
formerly  cost  £60  and  yielded  3  per  cent,  will  now  cost  £100.  There  is  no 
decrease  of  the  revenue  and  there  ia  an  increase  in  the  capital.  It  is  quite 
a  good  bargain.  A  lowering  of  the  rate  of  interest  will  simply  reduce  the 
amount  of  capital  in  those  instances  where  the  borrower  can  effect  a  conversion 
to  his  own  advantage. 

1  This  truth  is  BO  obvious  that  Rodbertus,  as  we  shall  see  by  and  by,  took 


842  THE  OPTIMISTS 

Not  only  is  the  demonstration  which  Bastiat  thought  he  had 
given  false,  but  the  thesis  itself  is  very  doubtful  when  tested  by  the 
facts.  Statistics  seem  to  show  quite  clearly — Bastiat's  law  notwith- 
standing, and  not  depreciating  the  influence  of  other  powerful 
factors,  such  as  trade  unions,  strikes,  and  State  intervention — that 
during  the  course  of  the  nineteenth  century  the  share  of  the  social 
revenue  which  falls  to  the  lot  of  capital  has  increased  more  rapidly 
than  labour's.1 


IV :  THE  SUBORDINATION  OF  PRODUCER 
TO  CONSUMER 

BASTIAT  laid  considerable  stress  upon  this  principle,  but  it  is  not 
easy  to  realise  its  harmonic  significance. 

The  subordination  of  producer  to  consumer  is  nothing  less  than 
the  subordination  of  private  to  general  interest.  Producers  always 
consult  their  own  interests,  and  are  continually  in  search  of  profits. 
Still,  everything  invented  with  a  view  to  increasing  profits  results  in 
lowering  prices,  so  that  the  consumer  is  the  person  who  finally 
benefits  by  it.2  And  so  economic  laws,  the  law  of  competition  and 
of  value,  constrain  the  producer  who  really  wishes  to  be  selfish  to 
be  altruistic,  even  de£)>ite  himself.  The  laws  outwit  him,  but  his 
undoing  benefits  everyone  else.  While  working  for  a  maximum 
profit  he  is  really  toiling  to  satisfy  the  needs  of  others  in  the  most 
economical  fashion,  and  therein  lies  the  harmony. 

In  all  difficult  economic  problems  the  criterion  should  be  this : 
What  solution  will  prove  most  advantageous  to  consumers  ?  Never 
ought  we  ask  what  will  be  most  profitable  for  producers,  although, 

the  opposite  point  of  view  and  attempted  to  argue  on  the  strength  of  the  "  iron 
law"  that  capital's  share  is  always  increasing,  while  labour's  is  decreasing. 
This  thesis  seems  to  have  no  better  foundation  than  the  other.  See  an  article 
by  Riat  entitled  Deux  Sophism&s  economiques,  in  the  Revue  d'Economie  politique 
for  March  1905. 

Bastiat's  thesis  may  also  be  seen  in  Carey.  The  Liberal  school  has  clearly 
adopted  it.  See  Paul  Leroy-Beaulieu's  Repartition  der  Bichesses. 

1  See  Gide's  Political  Economy,  p.  599  (English  translation),  and  Colson's 
Political  Economy,  vol.  iii,  p.  366.  According  to  Colson,  capital's  share  has 
quadrupled  since  1820,  while  labour's  has  only  increased  in  the  proportion  of 
1:3*. 

1  "  Just  as  the  earth  is  the  great  reservoir  of  electricity,  so  the  public  or  the 
consumer  is  the  one  source  of  any  gain  or  loss  which  the  producer  makes  or 
suffers.  Everything  comes  back  to  the  consumer.  Consequently  every  im- 
portant question  must  be  studied  from  the  consumer's  point  of  view  if  we 
want  to  get  hold  of  its  general  and  permanent  results,"  (Harmonies,  chap.  11, 
p.  414.) 


THE  SUBORDINATION  OF  PRODUCER  TO  CONSUMER  343 

unfortunately,  this  is  the  more  usual  question.  In  matters  of 
international  trade,  when  the  interest  of  the  producer  is  uppermost, 
Protection  is  established.  If  we  only  consulted  the  interest  of 
consumers,  Free  Trade  would  become  an  immediate  necessity.  Or 
take  the  case  of  public  or  private  expenditure.  The  producer  can 
bring  himself  to  excuse  or  even  to  approve  of  breaking  windows  or 
wasting  powder,1  but  the  consumer  unceremoniously  condemns  all 
such  destruction  of  wealth  as  useless  consumption. 

But  Bastiat  is  not  content  with  giving  the  consumer  mere 
economic  pre-eminence.  He  is  equally  anxious  to  demonstrate  his 
moral  superiority.  "  If  humanity  is  to  be  perfected,  it  must  be  by 
the  conversion  of  consumers,  and  not  by  the  moralising  of  pro- 
ducers," *  and  so,  he  holds  consumers  responsible  for  the  production 
of  unnecessary  or  worthless  commodities,  such  as  alcohol.8  Bastiat's 
contribution  to  this  subject  is  quite  first-class,  and  may  possibly  be 
his  best  claim  to  a  place  among  the  great  economists.  He  was  not 
far  wrong  when  on  his  deathbed  he  delivered  to  his  disciples  as  his 
last  instructions — his  novissima  verba,  "  Political  economy  should 
be  studied  from  the  consumer's  standpoint."  This  distinguishes 
him  from  his  famous  antagonist,  Proudhon,  who  always  had  the 
producer's  interest  at  heart. 

The  only  things  with  which  we  can  reproach  Bastiat  are  a  too 
persistent  faith  in  natural  harmonies  and  a  belief  in  the  efficacy  of 
ordinary  economic  laws  to  bring  about  the  supremacy  of  the  con- 
sumer. In  fact,  the  consumer's  reign  has  not  yet  come,  and  the 
economic  mechanism  is  becoming  more  and  more  the  tool  of  the 
profit-maker.  The  consumer  has  had  to  seek  in  organisation  a 
method  of  defending  his  own  interests  and  those  of  the  public,  with 
whose  interests  his  own  are  often  confused.  This  is  why  we  have 
institutions  like  the  co-operative  society  and  the  consumers'  league. 
His  moralisation,  moreover,  is  not  entirely  his  own  affair.  Before 
the  consumer  realises  the  full  measure  of  his  responsibility  and  the 
extent  of  his  duties  a  great  deal  of  work  will  be  necessary  on  the 
part  of  buyers'  social  leagues,  temperance  leagues,  etc. 

Strangely  enough,  economists  of  the  Liberal  Individualist  school 
view  such  institutions  with  a  somewhat  critical  eye.4 

1  See  one  of  Bastiat's  best  known  pamphlets,  La  Vitre  cassee. 

*  Harmonies,  chap.  6,  p.  419. 

8  Quoted  by  his  friend  Pailloltet  in  his  preface  to  the  CEuvres  complete*. 

*  E.g.  Yves  Guyot  in  the  Journal  des  Economistes  for  1904  et  passim.     See 
p.  326. 


344  THE  OPTIMISTS 

V  :  THE  LAW  OF  SOLIDARITY 

WE  must  not  forget,  as  most  writers  on  the  subject  seem  to  have 
done,  that  Bastiat  was  the  first  to  give  the  law  of  solidarity — so 
popular  in  the  economics  of  to-day — a  position  of  honour  within  the 
science  of  political  economy.1  One  of  the  unfinished  chapters  of 
the  Harmonies,  entitled  **  Solidarity,"  was  meant  to  expound  the 
thesis  that  "  society  is  just  a  collection  of  solidarities  woven 
together."  2 

The  name  is  deceptive,  however,  and  his  conception  of  solidarity 
is  quite  different  from  the  one  current  to-day,  while  the  conclusions 
drawn  are  by  no  means  similar. 

The  fundamental  doctrine  upon  which  the  Solidarists  of  to-day 
would  base  a  new  morality  is  briefly  this  :  Every  individual  owes  all 
the  good  with  which  he  is  endowed,  and  all  the  evil  with  which  he 
is  encumbered,  to  others.  So  whether  he  is  wealthy  or  poor,  virtuous 
or  vicious,  it  is  his  duty  to  share  with  those  who  are  worse  off,  and  he 
has  a  right  to  demand  a  share  from  those  who  are  better  off.  Only 
in  this  way  can  we  justify  legal  assistance,  insurance,  Factory  Acts, 
education,  and  taxation.  The  doctrine  is  a  negation,  or  at  the  very 
least  a  modification,  of  the  strict  principle  of  individual  responsibility. 

But  Bastiat  views  it  differently.  He  has  no  desire  to  weaken 
individual  responsibility,  for  responsibility  must  be  the  indispensable 
corrective  of  liberty.  And  solidarity,  because  of  the  feeling  of 
interdependence  to  which  it  gives  rise,  is  so  bewildering  that  Bastiat 
anxiously  asks  whether  solidarity  is  actually  necessary  "  in  order  to 
hasten  or  to  secure  the  just  retribution  of  deeds  done."  A  closer 
survey  reconciles  him  to  the  prospect,  for  he  sees  in  it  a  means  of 
extending  and  deepening  individual  responsibility.  Seeing  that  the 
results  of  good  and  bad  deeds  react  upon  everyone,  everybody  must 
be  interested  in  furthering  every  good  deed  and  in  repressing  the  bad, 
especially  since  every  deed  reacts  upon  its  author  with  its  original 
force  multiplied  a  thousand,  and  perhaps  a  million  times.3  The 

1  The  word  is  not  his  invention.  That  honour  is  claimed  by  Pierre  Leroux. 
See  p.  235. 

1  Harmonies,  chap.  21,  p.  624. 

"There  is  not  a  man  living  whose  character  has  not  been  determined  by 
a  thousand  factors  entirely  beyond  his  control."  (Ibid.,  p.  623.) 

"  All  profit  by  the  progress  of  the  one,  and  the  one  by  the  progress  of  the 
many."  (Ibid.,  chap.  11,  p.  411.) 

8  "Solidarity  implies  a  kind  of  collective  responsibility.  And  so  solidarity 
as  well  as  responsibility  is  a  force  that  makes  for  progress.  It  is  a  system  that 
is  admirably  calculated  to  check  evil  and  to  advance  the  good."  (Ibid,, 
chap.  21,  pp.  622-626.) 


BASTIAT  AND  THE  LAW  OF  SOLIDARITY       345 

harmony  just  consists  in  that.  Bastiat's  solidarity  aims,  not  at  the 
development  of  fraternity,  but  at  the  strengthening  of  justice.  It 
does  not  urge  upon  society  the  duty  of  permitting  no  differences 
among  its  members,  but  it  does  emphasise  the  importance  of  handling 
the  scourge  or  bestowing  the  palm  with  greater  impartiality.  And 
Bastiat,  despite  his  law  of  solidarity — nay,  possibly  because  of  that 
very  law — definitely  rejects  all  legal  assistance,  even  in  the  case  of 
deserted  children  !  National  insurance,  old  age  pensions,  profit- 
sharing,  free  education,  everything  that  is  comprised  under  the  term 
"  social  solidarity  "  is  cast  aside.1 

It  is  a  terribly  individualistic  conception  of  solidarity.  Com- 
parison with  Carey's  ideas  is  again  interesting.  Carey  may  seem  to 
ignore  it  altogether,  inasmuch  as  he  never  mentions  the  name.  But 
if  the  name  was  unknown  to  him  he  gave  a  good  description  of  the 
principle  itself  when  he  referred  to  it  as  "  the  power  of  association." 
And  he  was  also  probably  the  first  to  put  the  double  character  of 
solidarity,  as  we  know  it  to-day,  in  a  clear  light : 

(1)  As  the  differences  among  mankind  increase  in  number  and 
intensity  the  more  perfect  will  solidarity  become. 

(2)  Individuality,  instead  of  being  weakened  by  it,  is  strengthened 
and  intensified.* 

Someone  may  perhaps  point  out  that  in  our  treatment  of  the 
Optimists'  attack  upon  the  great  Classical  laws  no  mention  has  been 
made  of  that  terribly  discordant  theme,  Malthus's  law  of  population, 
which  ascribes  all  vice  and  misery  to  the  operation  of  a  natural 
instinct.  On  this  particular  point  Bastiat's  treatment  is  lacking  in 
both  vigour  and  originality.  His  reply  merely  amounts  to  showing 

1  "  Workers  must  understand  that  these  collective  funds  [pension  funds] 
must  be  voluntarily  contributed  by  those  who  are  to  have  a  share  in  them. 
It  would  be  quite  unjust,  as  well  as  anti-social,  to  raise  them  by  means  of  taxa- 
tion— that  is,  by  force — from  the  classes  who  have  no  share  in  the  benefits." 
(Harmonies,  chap.  14,  p.  471.) 

"  A  peasant  marries  late  in  the  hope  of  having  a  small  family,  and  we  force 
him  to  rear  other  people's  children.  He  has  to  contribute  towards  the  rearing  of 
bastards."  (Ibid.,  chap.  20,  pp.  617,  618.) 

Speaking  of  sharing  in  the  benefits,  he  remarks :  "  That  is  really  not  worth 
talking  about."  (Ibid.,  chap.  14,  p.  457.) 

1  "  Organisms  in  nature  have  their  rank  and  degree  of  perfection  determined 
by  the  number  of  organs  which  they  possess  and  the  amount  of  difference  which 
exists  between  each  of  them."  (Social  Science,  vol.  iii,  p.  461.) 

"  Life  has  been  defined  as  an  exchange  of  mutual  obligations,  but  if  there 
were  no  difference  between  the  various  objects  how  could  the  exchange  take 
place  ?"  (Ibid.,  vol.  i,  pp.  54-55.) 

"  The  more  perfectly  co-ordinated  the  whole  is,  the  better  developed  will  be 
each  of  its  parts/'  (Ibid.,  vol.  iii,  p.  462.) 

K.D.  II 


346  THE  OPTIMISTS 

that  the  preventive  obstacles,  such  as  shame  and  continence,  religious 
feeling  and  the  desire  for  equality,  all  of  which  limit  the  number  of 
children,  are  equally  natural,  so  that  nature  has  placed  a  remedy 
alongside  of  the  evil. 

A  more  solid  argument,  borrowed  from  Carey,  attempts  to  show 
how  a  growing  density  of  population  allows  of  a  growth  of  production, 
so  that  the  production  of  commodities  may  develop  pari  passu  with 
the  growth  of  population,  or  may  even  exceed  it.  Carey  relied 
upon  his  own  observations.  All  over  the  vast  American  continent, 
especially  on  the  immense  plains  of  the  Mississippi,  he  noticed  that 
the  few  encampments  of  the  poor  tribes  that  dwelt  there  were  being 
rapidly  replaced  by  large  industrial  centres.  Such  an  increase  of 
population  in  immediate  contiguity  naturally  resulted  in  a  great 
amassing  of  wealth. 

We  have  already  noted  the  fact  that  the  growth  of  wealth  in  the 
United  States  has  outstripped  the  increase  in  its  population.  The 
simultaneous  development  of  Germany,  both  in  numbers  and  wealth, 
is  still  more  striking. 

But  Carey's  population  theory  is  open  to  the  same  criticism  as 
was  urged  against  his  theory  of  rent.  Up  to  a  certain  degree  of 
density  it  is  undoubtedly  true,  but  there  is  no  ground  for  believing 
that  it  holds  good  beyond  this. 

Bastiat's  name  is  frequently  linked  with  Dunoyer's,  to  whom  we 
have  already  had  occasion  to  refer.1  Dunoyer  was  one  of  the  most 
militant  of  the  politico-economic  Liberals,  and  fully  shared  their 
belief  that  free  competition  was  a  sufficient  solution  for  every  social 
problem.8  The  obvious  drawbacks  of  free  competition,  he  thought, 
were  due  to  its  imperfect  character.  No  one  was  more  opposed  to 
State  Socialism  and  to  intervention  of  every  kind.  He  was  opposed 
to  labour  legislation,  to  Protection,  to  the  regulation  of  the  rights 
of  property,  and  even  to  the  State  management  of  forests.  As  we 
have  already  remarked,  he  was  against  every  kind  of  combination, 
because  it  stood  as  an  obstacle  in  the  path  of  free  competition. 

Logically  enough  he  was  in  favour  of  the  free  disposal  of  land, 
and  would  not  even  make  any  reservations  in  favour  of  heirs.  He 
refuses  to  recognise  the  right  of  entail  because  the  exercise  of  the 

1  Charles  Dunoyer  was  Bastiat's  senior.  The  first  edition  of  De  la  Liberti 
dtt  Travail,  to  which  we  have  already  referred,  dates  from  1 825,  and  the  last  edition 
from  1845.  He  took  an  active  part  in  opposing  the  Restoration  Government, 
but  he  became  prefect  and  subsequently  Conseiller  d'Etat  under  Louis  Philippe. 

*  RIolinari,  a  modern  French  economist,  holds  similar  views. 


BASTIAT  AND  THE  LAW  OF  SOLIDARITY       847 

testator's  liberty  necessarily  involves  the  curtailment  of  the  liberty 
of  his  successors.1 

Some  of  the  arguments  which  he  employs  in  support  of  free 
exchange  are  quite  novel.  The  following  is  one  of  the  most  interest- 
ing. Admitting  that  it  is  not  to  the  advantage  of  a  poor  country 
to  trade  with  another  which  is  wealthier  or  industrially  superior,  the 
same  thing  must  apply  to  the  poorer  districts  of  a  country  in  their 
dealings  with  other  provinces  that  have  suddenly  become  rich,  or 
with  rich  provinces  recently  acquired  by  conquest.  But  "  as  soon 
as  they  are  annexed  their  superiority  presumably  disappears."  The 
argument  is  amusing,  but  not  very  solid.  It  is  not  impossible  that 
free  exchange,  even  within  the  bounds  of  the  same  country,  may  have 
the  effect  of  drawing  capital  and  labour  from  the  poorer  districts 
towards  the  richer,  from  Creuse  or  Corsica  to  Paris.  This  is  just 
what  does  happen.  It  is  not,  perhaps,  a  very  serious  evil,  because 
what  France  loses  on  the  one  hand  she  gains  on  the  other ;  but  if 
Creuse  or  Corsica  were  independent  states,  anxious  to  preserve  their 
individuality,  we  could  understand  their  taking  measures  to  prevent 
this  drainage.  It  is  true  that  it  is  not  easy  to  see  how  protective 
rights  could  accomplish  this — a  point  which  Dunoyer  might  well  have 
emphasised. 

We  cannot  speak  of  Dunoyer  without  saying  a  word  about  his 
theory  of  production.  Labour  with  him  is  everything.  Nature  and 
raw  material  are  nothing.  He  stands  at  the  opposite  pole  to  the 
Physiocrats,2  and  supplied  a  handle  to  those  socialists  who  before 
Marx's  day  had  thought  that  laboui  was  the  only  source  of  wealth, 
and  that  consequently  all  wealth  should  belong  to  the  worker.  But 
he  pays  no  very  great  attention  to  this  idea.  His  chief  concern  is 
with  production,  and  not  with  distribution. 

From  this  view  of  production  he  draws  several  interesting 
conclusions. 

In  the  first  place,  it  matters  little  to  him  whether  labour  is  applied 
to  material  objects  or  not.  That  makes  no  difference,  so  far  as  its 

1  If  a  person  died  intestate  he  was  in  favour  of  equal  division  of  wealth. 
The  arguments  which  he  employed  are  very  interesting,  especially  those  directed 
against  the  upholders  of  primogeniture.  They  thought  that  by  depriving  the 
younger  sons  of  their  inheritance  they  became  more  industrious  and  thoughtful. 
Dunoyer  replies  by  asking  whether  it  would  not  be  an  advantage  to  deny  the 
right  of  succession  to  the  eldest  son  as  well,  "for  it  is  obviously  unfair  that  he 
should  be  deprived  of  that  kind  of  training  which  is  so  profitable  to  his  younger 
brothers."  Dunoyer  forgot  that  it  would  have  gone  iU  with  hi«  arguments  if  the 
socialists  had  taken  him  at  his  word. 

1  "Labour  is  the  only  source  of  productive  power.  Capital  is  a  human 
creation,  and  land  is  simply  a  form  of  capital."  (De  la  Liberte  du  Travail,  Book  VI.) 


348          DECLINE  OF  THE  CLASSICAL  SCHOOL 

character  or  productivity  is  concerned,  for  in  both  cases  what  is 
produced  is  an  immaterial  thing  called  utility.  What  the  baker 
produces  is  not  bread,  but  the  wherewithal  to  satisfy  a  certain 
desire.  This  is  exactly  what  the  prima  donna  produces.  The  so- 
called  liberal  professions  are  placed  in  the  same  category  as  manual 
work,  and  in  this  respect  again  Dunoyer  takes  up  a  position  opposed 
to  that  of  the  Physiocrats.1 

Contrary  to  what  might  have  been  expected,  this  large  extension 
of  the  concept  production  fails  to  include  commerce.  Dunoyer 
applies  the  title  productive  to  the  singer,  but  refuses  it  to  the 
merchant,  and  by  this  strange  reversal  he  arrives  once  again  at  the 
Physiocratic  position.  Exchange  is  not  productive  2  because  buying 
and  selling  does  not  involve  any  work,  and  where  there  is  no  work 
there  is  no  production.  Exchange  creates  utilities,  and  it  is  not 
easy  to  understand  what  more  Dunoyer  expects  from  it,  seeing  he 
admits  that  labour  can  do  nothing  more.  Exchange,  he  thought, 
was  a  purely  legal  transaction,  and  he  was  loath  to  admit  that  any 
act  of  a  ''•  corporate  will  "  without  labour  or  physical  effort  could 
create  wealth,  just  as  the  Physiocrats  found  it  impossible  to  think  of 
wealth  other  than  as  a  product  of  the  soil. 


CHAPTER  II :  THE  APOGEE  AND  DECLINE  OF 
THE  CLASSICAL  SCHOOL.  JOHN  STUART  MILL 

WHILE  the  French  economists,  alarmed  at  the  consequences 
involved  in  the  theories  of  Malthus  and  Ricardo,  strove  to  transmute 
the  Brazen  laws  into  Golden  ones,  the  English  economists  pursued 
their  wonted  tasks,  never  once  troubled  by  the  thought  that  they 

1  Say  had  already  recognised  the  claims  of  immaterial  wealth  alongside  of 
material,  and  he  had  employed  the  term  "  services  "  in  describing  them.  In 
this  way  he  considered  that  the  professor,  the  doctor  and  the  actor  had  claims  to 
be  regarded  as  producers.  Dunoyer,  while  accepting  his  conclusion,  criticises 
his  way  of  putting  it.  He  recognises  no  distinction  between  material  and 
immaterial  wealth.  There  is  nothing  but  utility.  "  It  is  true  that  taste,  educa- 
tion, etc.,  are  immaterial,  but  so  is  everything  that  man  produces."  But  he  is 
entirely  wrong  when  he  says  that  a  good  teacher  is  a  producer  of  enlightened 
men  and  a  doctor  a  producer  of  healthy  persons.  We  are  at  a  loss  to  explain 
why  at  one  moment  he  refuses  to  recognise  the  material  element  in  production, 
while  at  another  he  grossly  exaggerates  the  material  results  of  purely  intellectual 
labour. 

*  "Labour  and  exchange  belong  to  two  categories  of  facts  which  are  abso- 
lutely distinct  in  their  nature.  Labour  implies  production.  Commerce  and 
exchange  imply  nothing  of  the  kind."  (De  la  Liberte  du  Travail,  p.  fi99.) 


DECLINE  OF  THE  CLASSICAL  SCHOOL          849 

were  possibly  forging  a  weapon  for  their  own  destruction  at  the 
hands  of  socialists. 

The  thirty  years  which  separate  the  publication  of  Ricardo's 
Principles  of  Political  Economy  {1817)  from  Mill's  book  bearing  the 
same  title  are  occupied  by  economists  of  the  second  rank,  who 
apply  themselves,  not  to  the  discovery  of  new  principles,  but  to  the 
development  and  co-ordination  of  those  already  formulated.  Of 
course  we  must  not  lose  sight  of  the  mass  of  critical  work  bearing 
upon  certain  aspects  of  current  doctrines,  which  was  produced  by 
English  economists  just  about  this  time.  But  their  ideas  attracted 
as  little  attention  as  did  Cournot's  in  France  or  Gossen's  in 
Germany.1 

These  were  the  days  when  Miss  Martineau  and  Mrs.  Marcet  gave 
expositions  of  political  economy  in  the  form  of  tales,  or  conversa- 
tions with  "  young  Caroline,"  2  when  MacWickar,  writing  his  First 
Lessons  in  Political  Economy  for  the  use  of  Elementary  Schools, 
expressed  the  belief  that  the  science  was  already  complete.  "  The 
first  principles  of  political  economy,"  he  wrote,  "  are  mere  truisms 
which  children  might  well  understand,  and  which  they  ought  to  be 
taught.  A  hundred  years  ago  only  savants  could  fathom  them. 
To-day  they  are  the  commonplaces  of  the  nursery,  and  the  only  real 
difficulty  is  their  too  great  simplicity."  8 

We  cannot  attempt  the  individual  study  of  all  the  economists  of 
this  period.4  However,  one  of  them,  Nassau  Senior,6  certainly 
deserves  more  space  than  we  can  give  him  in  this  history,  and  is 

1  Seligman  in  the  Economic  Journal  for  1903,  pp.  335-511,  devotes  two 
very  interesting  articles  to  such  writers  under  the  title  of  Some  Neglected 
British  Economists.  One  is  astonished  to  find  how  many  there  are  and  the 
originality  which  they  show,  and  to  learn  that  several  of  the  more  important 
modern  theories  are  simply  rediscoveries. 

*  Mrs.  Marcet's  Conversations  belong  to  1817,  Miss  Martineau's  Illustrations 
to  1832.     The  latter  had  a  wonderful  vogue. 

1  Quoted  by  Seager  in  a  lecture  on  economics  at  Columbia  University  in  1 908. 

*  We  have  already  referred  to  McCulloch  and  James  Mill,  two  of  Ricardo's 
immediate  disciples.     We  must  just  add  the  names  of  Torrens  and  Gibbon 
Wakefield.     Wakefield  was  the  author  of  a  book  which  had  a  great  reputation 
at  one  time,  but  which  was  simply  an  attempt  to  apply  the  Ricardian  principles 
to  the  practice  of  colonisation. 

5  Nassau  Senior  during  a  part  of  his  life  was  Professor  of  Political  Economy 
at  Oxford.  The  Oxford  chair,  created  in  1825,  was  the  first  chair  of  economics 
to  be  established  in  England.  His  writings,  which  treat  of  various  subjects, 
belong  to  the  period  1827-52.  The  bulk  of  his  doctrine  is  contained  in  hia 
Political  Economy,  contributed  to  the  Encyclopedia  Britannica  in  1836  and  after- 
wards published  separately.  This  small  volume  may  be  regarded  as  the  earliest 
manual  of  political  economy. 


350  DECLINE  OF  THE  CLASSICAL  SCHOOL 

perhaps  the  best  representative  of  the  Classical  school,  showing  its 
good  and  bad  points  better  than  any  other  writer.  He  removed 
from  political  economy  every  trace  of  system,  every  suggestion  of 
social  reform,  every  connection  with  a  moral  or  conscious  order, 
reducing  it  to  a  small  number  of  essential,  unchangeable  prin- 
ciples. Four  propositions  seemed  sufficient  for  this  new  Euclid,1 
all  necessary  corollaries  being  easily  deducible  from  one  or  other  of 
these.  Senior's  ambition  was  to  make  an  exact  science  of  it, 
and  he  deserves  to  be  remembered  as  one  of  the  founders  of  pure 
economics. 

He  is  responsible  for  the  introduction  into  political  economy  of 
a  new  and  hitherto  neglected  element,  namely,  an  analysis  of 
abstinence  or  saving.  (The  former  word,  which  is  Senior's  choice, 
is  the  more  striking  and  precise  term.)  It  is  true  enough,  as 
Senior  remarks,  that  abstinence  does  not  create  wealth,  but  it 
constitutes  a  title  to  wealth,  because  it  involves  sacrifice  and  pain 
just  as  labour  does.  Hitherto  the  income  of  capital  had  been  the 
least  defensible  of  all  revenues,  for  Ricardo  had  only  discussed  it 
incidentally,  and  had  represented  it  as  a  surplus  left  over  after 
paying  wages.  The  claim  of  capital  was  believed  to  be  as  evident 
as  that  of  land  or  labour,  and  there  was  no  need  for  any  further 
inquiry.  But  has  it  any  real  right  to  separate  remuneration,  seeing 
that,  unlike  the  other  two  agents,  it  is  itself  a  product  of  those  two 
and  not  an  original  factor  of  production  ?  Here  at  last  is  its  title, 
not  in  labour,  but  in  abstinence. 

But  if  on  the  one  hand  Senior  succeeds  in  establishing  the  claim 
of  interest,  he  invalidates  the  claim  of  most  other  capital  revenues 
on  the  other.  Let  us  follow  his  argument.  Cost  of  production  is 
made  up  of  t*,vo  elements,  labour  and  abstinence,  and  wherever  free 
competition  obtains,  the  value  of  the  products  is  reduced  to  this 
minimum.  Where  competition  is  imperfect,  where  there  is  a  greater 
or  less  degree  of  monopoly,  then  between  cost  of  production  and 
value  lies  a  margin  which  constitutes  extra  income  for  those  who 
profit  by  it.  This  revenue  by  definition  of  labour  and  abstinence  is 
independent  of  every  sacrifice  or  personal  effort.  This  revenue 
Senior  calls  rent,  and  his  theory  is  thus  a  mere  extension  of  the 
Ricardian.  Rent  is  not  the  result  of  appropriating  the  better 
situated  or  the  more  fertile  lands  only.  It  may  be  due  to  the  appro- 
priation of  some  natural  agent  or  to  the  possession  of  some  personal 

1  The  four  principles  were :  (i)  the  Hedonistic  Principle ;  (ii)  the  Principle 
of  Population  ;  (iii)  the  Law  of  Increasing  Returns  in  Industry ;  (iv)  the  Law 
of  Diminishing  Returns  in  Agriculture. 


DECLINE  OF  THE  CLASSICAL  SCHOOL  851 

quality  such  as  the  artiste's  voice  or  the  surgeon's  skill,1  or  it  may 
simply  be  the  result  of  social  causes  or  fortuitous  circumstances. 
Senior  shows  that  rent,  far  from  being  an  exceptional  phenomenon, 
is  really  quite  normal.  This  kind  of  revenue  which  is  wanting  in 
title — drawn,  but  not  earned — is  extremely  important,  and  absorbs 
a  great  share  of  the  total  wealth.  Indeed,  Senior  goes  much  further, 
and  states  that  whenever,  as  in  the  case  of  death,  capital  passes  from 
the  hands  of  those  who  have  earned  it  into  the  possession  of  others, 
it  immediately  becomes  rent.  The  inheritor  cannot  plead  abstinence 
— the  virtue  is  not  transmissible,  and  he  has  no  title  to  his  fortune 
except  just  good  luck.2 

No  revolutionary  socialist  could  ever  have  invented  a  better 
argument  for  the  abolition  of  the  existing  order.  And  how  different 
from  the  "  natural  order  "  1  But  Senior  is  quite  unmoved,  and  the 
superb  indifference  with  which  economists  of  the  Ricardian  school 
affirm  their  belief  in  their  doctrines  without  taking  any  account  of 
the  consequences  which  might  uphold  or  might  destroy  those  very 
beliefs  has  a  peculiar  scientific  fascination  for  us. 

Also,  it  was  Senior  who  laid  stress  upon  scarcity  as  the  basis  of 
economic  value.  But  a  thing  to  possess  value  must  be  not  merely 
rare,  it  must  also  satisfy  some  want.  It  must  be  a  rare  utility.  It 
is  the  same  term,  "  scarcity,"  that  was  employed  by  Walras. 

The  Classical  doctrines  were  taught  during  the  first  half  of  the 

1  "  But  a  considerable  part  of  the  produce  of  every  country  is  the  recompense 
of  no  sacrifice  whatever  ;  is  received  by  those  who  neither  labour  nor  put  by, 
but  merely  hold  out  their  hands  to  accept  the  offerings  of  the  rest  of  the  com- 
munity." (Political  Economy,  p.  89.)  He  takes  the  income  of  a  successful 
doctor  as  an  illustration,  and  divides  it  up  as  follows  (ibid.,  p.  189) : 

Wages  or  payment  for  labour  .  •  .  £40 
Profit  or  payment  for  abstinence  .  .  .  £960 
Rent £3000 

See  Senior's  Theory  of  Monopoly,  by  Richard  Ely  (American  Economic 
Association,  1899). 

1  This  confusion  between  rent  and  the  income  of  inherited  wealth  does  little 
honour  to  Senior,  for  the  two  facts  belong  to  entirely  different  categories.  Rent 
is  a  purely  economic  phenomenon,  resulting  from  the  necessary  conditions  of 
exchange.  It  owes  nothing  to  social  organisation,  not  even  to  the  institution 
of  private  property.  Inheritance,  on  the  other  hand,  is  a  purely  juridical  phe- 
nomenon, the  product  of  civil  law.  Even  if  inheritance  were  abolished  it  would 
make  no  difference  to  the  existence  and  growth  of  rent,  whether  obtained  from 
the  soil  or  from  some  other  source ;  whereas  under  the  hypothetical  rigime  of 
perfectly  free  competition,  although  rent  would  no  longer  be  known,  inheritance, 
together  with  all  its  privileges,  might  still  continue  to  exist.  Senior  evidently 
understands  by  the  term  "  rent "  any  kind  of  income  that  is  not  obtained  by 
personal  effort.  But  this  is  clearly  a  perversion  of  the  original  meaning. 


352  DECLINE  OF  THE  CLASSICAL  SCHOOL 

nineteenth  century,  not  in  England  alone,  but  in  every  country  of 
the  world.  In  Germany  they  were  expounded  by  von  Thiinen,  of 
whom  we  have  already  spoken,  and  by  his  contemporary  Rau.1  In 
France,  despite  the  growing  influence  of  the  optimistic  politico- 
liberal  creed  considered  in  our  last  chapter,  English  Classical 
economics  was  still  taught  by  a  large  number  of  economists,  among 
whom  Rossi  deserves  special  mention.  His  Cours  d'ficonomie 
politigue,  published  in  1840,  enjoyed  a  fair  success,  due,  not  to  any 
originality  in  the  contribution  itself,  but  to  the  somewhat  oratorical 
style  of  the  work.2 

But  to  proceed  to  the  central  figure  of  this  chapter — John  Stuart 
Mill.8  With  him  Classical  economics  may  be  said  in  some  way 
to  have  attained  its  perfection,  and  with  him  begins  its  decay.  The 
middle  of  the  nineteenth  century  marks  the  crest  of  the  wave. 
What  makes  his  personality  so  attractive  is  his  almost  dramatic 
appearance,  and  the  consciousness  that  he  was  placed  between  two 
schools,  even  between  two  worlds.  To  the  one  he  was  linked  by 
the  paternal  ties  which  bound  him  to  the  Utilitarian  school,  wherein 
he  was  nurtured  ;  the  other  beckoned  him  towards  the  new  horizons 
that  were  already  outlined  by  Saint-Simon  and  Auguste  Comte. 
During  the  first  half  of  his  life  he  was  a  stern  individualist ;  but  the 

1  Rau's  treatise  on  political  economy  belongs  to  the  years  1826-37,  and  vqn 
Thiinen's  Der  Isolirte  Stoat  appeared  in  1826. 

1  Pellegrino  Rossi,  who  became  a  naturalised  Frenchman  in  1833,  was  an 
Italian  by  birth.  He  succeeded  Say  as  professor  at  the  College  de  France.  He 
afterwards  became  Lecturer  on  Constitutional  Law,  and  his  name  is  commemo- 
rated in  one  of  the  annual  prizes.  He  eventually  entered  the  diplomatic  service, 
and  was  attached  to  the  Papal  See  during  the  pontificate  of  Pius  IX.  He  waa 
assassinated  at  Rome  in  1 848. 

'  Johi  Stuart  Mill,  born  in  1806,  was  the  son  of  James  Mill  the  economist  of 
whom  we  have  already  spoken.  The  system  of  education  which  his  father  planned 
for  him  can  only  be  described  as  extraordinary.  Practised  on  anyone  else  it  would 
have  been  fatal.  At  the  age  of  ten  he  was  already  well  versed  in  universal  history 
and  in  the  literatures  of  Greece  and  Rome.  At  thirteen  he  had  a  fair  grasp  of 
science  and  philosophy,  and  had  written  a  history  of  Rome.  By  the  time  he  was 
fourteen  he  knew  all  the  political  economy  that  there  was  to  know  then.  In 
1829,  then  a  young  man  of  twenty-three,  he  published  his  first  essays  on  political 
economy.  In  1843  appeared  his  well-known  System  of  Logic,  which  immediately 
established  his  fame.  In  1848  he  issued  the  admirable  Principles  of  Political 
Economy.  Mill  was  in  the  service  of  the  East  India  Company  up  to  the  time 
when  it  lost  its  charter  in  1858.  From  1865  to  1868  he  was  a  member  of  the 
House  of  Commons.  After  the  death  of  his  wife,  who  collaborated  with  him 
in  the  production  of  several  of  his  works,  especially  Liberty  (1859),  being  un- 
willing to  quit  the  spot  where  she  lay  buried,  he  spent  the  last  years  of  his  life, 
except  those  taken  up  by  his  Parliamentary  work,  at  Avignon.  His  auto- 
biography contains  a  precious  account  of  his  life  and  of  his  gradual  conversion 
td  socialistic  views. 


DECLINE  OF  THE  CLASSICAL  SCHOOL  353 

second  found  him  inclined  to  socialism,  though  he  still  retained  his 
faith  in  liberty.  His  writings  are  full  of  contradictions  ;  of  sudden, 
complete  changes,  such  as  the  well-known  volte-face  on  the  wages 
question.  Mill's  book  exhibits  the  Classical  doctrines  in  their  final 
crystalline  form,  but  already  they  were  showing  signs  of  dissolving 
in  the  new  current. 

Like  other  theorists  of  the  "  Pure  "  school,  he  declared  that  there 
was  no  room  in  political  economy  for  the  comparative  judgment  of 
the  moralist,  but  it  was  he  also  who  wrote :  "  If,  therefore,  the 
choice  were  to  be  made  between  communism  with  all  its  chances 
and  the  present  state  of  society  with  all  its  sufferings  and  injustices  ; 
if  the  institution  of  private  property  necessarily  carried  with  it  as 
a  consequence  that  the  produce  of  labour  should  be  apportioned  as 
we  now  see  it,  almost  in  an  inverse  ratio  to  the  labour — the  largest 
portions  to  those  who  have  never  worked  at  all,  the  next  largest  to 
those  whose  work  is  almost  nominal,  and  so  in  a  descending  scale,  the 
remuneration  dwindling  as  the  work  grows  harder  and  more  dis- 
agreeable, until  the  most  fatiguing  and  exhausting  bodily  labour 
cannot  count  with  certainty  on  being  able  to  earn  even  the  necessaries 
of  life  ;  if  this  or  communism  were  the  alternative,  all  the  difficulties, 
great  or  small,  of  communism,  would  be  but  as  dust  in  the  balance."  * 

It  was  Mill  the  utilitarian  philosopher  who  declared  that  a 
person  of  strong  conviction  "  is  a  social  power  equal  to  ninety-nine 
who  have  only  interests."  It  was  he  also  who  wrote  that  "  com- 
petition may  not  be  the  best  conceivable  stimulus,  but  it  is  at  present 
a  necessary  one,  and  no  one  can  foresee  the  time  when  it  will  not  be 
indispensable  to  progress."  But  he  also  admits  that  "  co-operation  is 
the  noblest  ideal,"  and  that  it  "  transforms  human  life  from  a  con- 
flict of  classes  struggling  for  opposite  interests  to  a  friendly  rivalry 
in  the  pursuit  of  a  good  common  to  all.**  * 

Mill,  it  has  been  said,  was  simply  a  gifted  popular  writer.  But 
this  is  to  under-estimate  his  ability.  It  is  true  that,  unlike  Ricardo, 
Malthus,  or  Say,  his  name  is  not  associated  with  any  economic  law, 
but  he  opened  up  a  wider  prospect  for  the  science  which  will 
secure  him  a  reputation  long  after  the  demise  of  these  so-called  laws. 
His  fame  is  doubly  assured,  for  in  no  other  work  on  political 
economy,  not  excepting  even  the  Wealth  of  Nations,  are  there  so 
many  pages  of  fine  writing,  so  many  unforgettable  formulae  which 
will  always  be  repeated  by  everyone  who  has  to  teach  the  science. 
It  is  not  for  nought  that  the  Principles  has  served  as  a  text-book  for 
half  a  century  in  most  of  the  English  universities. 

1  Principles,  Book  II,  chap.  1,  §  3.  >  Ibid.,  Book  IV,  chap.  7,  §  7, 


354  DECLINE  OF  THE  CLASSICAL  SCHOOL 

Before  examining  the  changes  in  the  Classical  doctrines  which 
Mill  himself  effected,  we  must  give  a  brief  outline  of  those  theories  as 
they  appeared  in  all  their  inflexible  majesty  towards  the  middle  of 
the  nineteenth  century,  during  the  period  between  the  publication 
of  the  Principles  and  the  death  of  John  Stuart  Mill,  between  1848  and 
1873.  This  was  the  period  when  the  Classical  Liberal  school  believed 
that  its  two  old  rivals,  Protectionism  and  socialism,  were  definitely 
crushed.  Reybaud,  in  his  article  on  socialism  in  the  Dictionnaire 
d' Economic  politique  of  1852,  wrote  as  follows  :  "  To  speak  of 
socialism  to-day  is  to  deliver  a  funeral  oration."  Protection  had 
just  been  vanquished  in  the  struggle  that  led  to  the  repeal  of  the 
English  Corn  Laws,  and  was  to  suffer  a  further  check,  alike  in  France 
and  in  the  other  countries  of  Europe,  as  a  result  of  the  treaties  of 
1860.  The  future  lay  with  the  Classics.  It  was  little  thought  that 
1867  would  witness  the  publication  of  Kapital,  that  in  1872  the 
Congress  of  Eisenach  would  reassemble,  when  the  treaties  of  1860 
would  be  publicly  denounced. 

Let  us  profit  by  its  hour  of  glorious  existence  to  give  an  exposition 
of  the  doctrines  which  it  taught.  The  treatment  must  necessarily  be 
very  summary,  seeing  that  we  are  not  writing  a  treatise  on  political 
economy,  and  that  our  attention  must  be  confined  to  writers  who 
are  definitively  members  of  the  Liberal  school. 


I  :  THE  FUNDAMENTAL  LAWS 

A  BELIEF  in  natural  laws  was  always  an  article  of  faith  with  the 
Classical  school.  Without  some  such  postulate  it  seemed  to  them 
that  no  collection  of  truths,  however  well  attested,  could  ever  lay 
claim  to  the  title  of  science.  But  these  natural  laws  had  none  of 
that  "  providential,"  "  finalistic,"  and  "  normative  "  character  so 
frequently  dwelt  upon  by  the  Physiocrats  1  and  the  Optimists.  They 
are  simply  natural  laws  like  those  of  the  physical  order,  and  are 
clearly  non-moral.  They  may  prove  useful  or  they  may  be  harmful,, 
and  men  must  adapt  themselves  to  them  as  best  they  can.  To  say 
that  political  economy  is  a  "  dismal  science  "  because  it  shows  that 
certain  laws  may  have  unfortunate  results  is  as  absurd  as  it  would 
be  to  call  physics  a  "  dismal  science  "  because  lightning  kills. 

1  Dupont  de  Nemours,  writing  very  much  in  the  spirit  of  the  Classical  school, 
had  already  given  an  excellent  definition  of  natural  law.  "  By  natural  law 
we  are  to  understand  those  essential  conditions  that  regulate  all  things  in  accord- 
ance with  the  design  laid  down  by  the  Author  of  Nature.  They  are  the  '  essential 
conditions '  to  which  men  must  submit  if  they  would  obtain  all  the  benefits 
which  the  natural  order  offers  them."  (Introduction  to  Quesnay's  works,  p.  21.) 


THE  FUNDAMENTAL  LAWS  355 

Far  from  being  irreconcilable  with  individual  liberty,  these  laws 
are  among  its  direct  results.  They  are  the  spontaneous  links  which 
bind  together  all  free  men.  Freedom  is  always  subject  to  conditions. 
Men  are  not  free  in  the  matter  of  eating  or  not  eating,  and  if  they 
would  eat  they  must  cultivate  the  soil.  Freedom  is  limited  not  only 
by  the  actions  of  other  human  beings,  but  also  by  the  laws  of  the 
physical  world  which  surrounds  us. 

These  laws  are  universal  and  permanent,  for  the  elementary 
needs  of  mankind  are  always  and  everywhere  the  same.  Economics 
is  in  quest  of  such  permanent  laws,  and  has  no  concern  with  the 
merely  temporary.  It  is  only  by  seeking  the  more  general  and 
consequently  the  more  nearly  universal  laws  that  economics  can 
apprehend  truth  or  hope  to  become  a  science.  It  must  study  man, 
not  men — the  type,  not  the  individual — the  homo  OBconomicus 
stripped  of  every  attribute  except  self-interest.  It  does  not  deny 
the  existence  of  other  qualities,  but  merely  relegates  them  to  the 
consideration  of  other  sciences. 

It  now  remains  to  see  what  those  natural  laws  were. 

(1)  The  Law  of  Self-interest.  This  law  has  since  been  named  the 
Hedonistic  principle — a  term  that  was  never  employed  by  the 
Classical  school.  Every  individual  desires  well-being,  and  so  would 
be  possessed  of  wealth.  Similarly  he  would,  if  possible,  avoid  evil 
and  escape  effort.  This  is  a  simple  psychological  law.  Could 
anything  be  more  universal  or  permanent  than  this  law,  which  is 
simply  the  most  natural  and  the  most  rational  (using  the  term  in  its 
Physiocratic  sense)  statement  of  the  law  of  self-preservation  ?  In 
virtue  of  this  fundamental  principle  the  Classical  school  is  frequently 
known  as  the  Individualist  school. 

But  individualism  need  imply  neither  egoism  nor  egotism.  This 
confusion,  which  is  repeatedly  made  with  a  view  to  discrediting  the 
Classical  writers,  is  simply  futile.  No  one  has  displayed  greater 
vigour  in  protesting  against  this  method  of  treating  individualism 
than  Stuart  Mill.  To  say  that  a  person  is  seeking  his  own  good 
is  not  to  imply  that  he  desires  the  failure  of  others.  Individualism 
does  not  exclude  sympathy,1  and  a  normal  individual  feels  it  a 
source  of  gratification  whenever  he  can  give  pleasure  to  others. 

But  this  did  not  prevent  Ricardo  and  Malthus  showing  the 
numerous  instances  in  which  individual  interests  conflict,  where 

1  Adam  Smith,  let  us  remember,  also  wrote  a  book  on  the  Theory  of  Moral 
Stniimenta  (see  Book  I,  chap.  2),  and  Stuart  Mill  writes  as  follows :  "  In  the 
golden  rule  of  Jesus  of  Nazareth  we  read  the  complete  spirit  of  the  ethics  of 
utility.  To  do  as  you  would  be  done  by  and  to  love  your  neighbour  as  yourself 
constitute  the  ideal  perfection  of  utilitarian  morality."  ( Utilitarianism,  chap.  2. ) 


356  DECLINE  OF  THE  CLASSICAL  SCHOOL 

it  is  necessary  that  one  interest  should  be  sacrificed  to  another. 
And  Mill,  far  from  denying  the  existence  of  these  conflicts,  has  taken 
special  pains  to  emphasise  them.  The  Classical  writers,  together 
with  the  Optimists,  reply  that  such  contradictions  are  apparent  only, 
and  that  beneath  these  appearances  there  is  harmony ;  or  they 
point  out  that  these  antinomies  are  due  to  the  fact  that  both 
individualism  and  liberty  are  only  imperfectly  realised,  and  as  yet 
not  even  completely  understood,  but  that  as  soon  as  they  are  securely 
established  the  evils  which  they  have  momentarily  created  will  be 
finally  healed.1  Liberty  is  like  Achilles'  lance,  healing  the  wounds 
it  inflicts.  Other  individualists,  such  as  Herbert  Spencer,  declare 
that  the  conflict  of  individual  interests  is  not  merely  advantageous 
to  the  general  interests  of  society,  but  is  the  very  condition  of 
progress,  weeding  out  the  incapable  to  make  room  for  the  fittest. 

(2)  The  Law  of  Free  Competition.  Admitting  that  each  individual 
is  the  best  judge  of  his  own  interests,  then  it  is  clearly  the  wisest 
plan  to  let  everyone  choose  his  own  path.  Individualism  pre- 
supposes liberty,  and  the  Individualist  school  is  also  known  as  the 
Liberal  school.  This  second  title  is  more  exact  than  the  first,  and 
is  the  only  one  which  the  French  school  will  accept.  It  emphatically 
repudiates  every  other,  whether  Individualist,  Orthodox,  or  Classical.1 

1  This  is  how  Mill  views  it :  "  It  is  only  in  a  very  imperfect  state  of  the 
world's  arrangements  that  anyone  can  best  serve  the  happiness  of  others  by 
the  absolute  sacrifice  of  his  own."  (Utilitarianism,  chap.  2.)  But  it  is  scarcely 
necessary  to  add,  seeing  that  the  two  propositions  are  necessarily  complementary, 
that  one  of  the  best  ways  of  securing  happiness  is  to  sacrifice  one's  self  in  the 
cause  of  others.  All  that  is  required  is  a  little  patience.  "  Education  and 
opinion  will  so  use  that  power  as  to  establish  in  the  mind  of  every  individual 
an  indissoluble  association  between  his  happiness  and  the  good  of  the  whole." 
Interpreted  in  this  way,  individualism  is  closely  akin  even  to  the  most  transcendent 
form  of  solidarity. 

*  One  is  sometimes  asked  to  state  the  differences  between  the  Classical,  the 
Individualist,  the  Liberal,  and  the  Optimist  schools.  The  question  does  not 
seem  to  us  to  be  a  very  important  one,  but  we  may  answer  it  in  this  way : 

(a)  The  Individualist  school,  according  to  the  worst  interpretation  put 
upon  it,  thinks  that  egoism  is  the  only  possible  system  of  ethics  and  that 
each  for  himself  is  the  sole  principle  of  action.  But,  naturally  enough,  everyone 
is  anxious  to  avoid  the  taunt  of  selfishness,  and  the  existence  of  such  economic 
ties  as  exchange  and  division  of  labour  make  egoism  impossible  as  an  ethical 
system.  According  to  the  broadest  interpretation  of  the  term,  individualism 
implies  the  recognition  of  individual  welfare  as  the  sole  aim  of  every  activity, 
whether  individual  or  social,  economic  or  political.  But  this  does  not  take  us 
very  far,  for  every  socialist  and  individualist  would  accept  this  interpretation. 
We  seldom  speak  of  the  welfare  of  society  per  se  as  an  entity  possessed  of  conscious 
feeling.  This  definition  is  much  too  wide.  It  includes  solidarity  and  association, 
State  intervention  and  labour  legislation,  provided  the  aim  be  to  protect  the 


THE  FUNDAMENTAL  LAWS  857 

The  English  school  is  equally  decisive  in  its  preference  for 
"  Liberalism."  The  terms  "  Manchesterism  "  and  "  Manchester- 
thum  "  have  also  been  employed,  especially  by  German  critics,  in 
describing  this  feature  of  their  teaching. 

But  the  Classical  school  itself  thought  of  laissez-faire  neither  as 
a  dogma  nor  a  scientific  axiom.  It  was  treated  merely  as  a  practical 
rule  which  it  was  wise  to  follow,  not  in  every  case,  but  wherever  a 
better  had  not  been  discovered.  Those  who  act  upon  it,  in  Stuart 
Mill's  opinion,  are  nearer  the  truth  nineteen  times  out  of  twenty  than 
those  who  deny  it.1  This  practical  Liberalism  is  intended  to  apply 
to  every  aspect  of  economic  life,  and  their  programme  includes 
liberty  to  choose  one's  employment,  free  competition,  free  trade 
beyond  as  well  as  within  the  frontiers  of  a  single  country,  free  banks, 
and  a  competitive  rate  of  interest ;  and  on  the  negative  side  it 
implies  resistance  to  all  State  intervention  wherever  the  necessity 
for  it  cannot  be  clearly  demonstrated,  as  in  the  case  of  protective  or 
parental  legislation. 

individual  against  certain  dangers.  Self-sacrifice  is  not  excluded,  for  what  can 
strengthen  individualism  like  self-sacrifice  ?  This  is  the  interpretation  which 
Schatz  puts  upon  it  in  his  L'Individualisme  iconomique  et  social.  But  the  term 
"  individualist  "  is  too  indefinite  and  we  must  avoid  it  whenever  we  can. 

(b)  The  so-called  Liberal  school  uses  the  term  in  a  much  more  definite  fashion. 
The  individual  is  to  be  not  merely  the  sole  end  of  economic  action,  but  he  is 
also  to  be  the  sole  agent  of  the  economic  movement,  because  no  one  else  can 
understand  his  true  interests  or  realise  them  in  a  better  way.     Interpreted  in 
this  fashion,  it  means  letting  the  individual  alone  and  removing  every  external 
intervention,  whether  by  the  State  or  the  master. 

According  to  the  one  definition,  individualism  is  a  creed  which  everyone 
can  adopt ;  according  to  the  other  it  is  open  to  very  serious  objections.  Experi- 
ence shows  that  the  individual,  whether  as  consumer  buying  injurious,  costly,  or 
useless  commodities,  or  as  worker  working  for  wages  that  ruin  his  health  and 
lower  his  children's  vitality,  is  a  poor  judge  of  his  own  interest,  and  is  helpless 
to  defend  himself,  even  where  science  and  hygiene  are  on  his  side. 

(c)  If  we  push  this  interpretation  a  stage  farther  and  admit  not  only  that  each 
individual  is  best  qualified  to  speak  for  himself,  but  also  that  the  social  interest 
is  simply  the  sum  of  the  individual  interests,  all  of  which  converge  in  a  harmonious 
whole,  then  the  Liberal  school  becomes  the  Optimistic.     In  France  it  has  the 
tradition  of  a  generation  behind  it,  and  an  attempt  has  been  made  to  revive  it  in 
certain  recent  works  ;  still  it  may  now  be  regarded  as  somewhat  antiquated. 

(d)  When  we  speak  of  the  Classical  school  we  mean  those  who  have  remained 
faithful  to  the  principles  enunciated  by  the  earlier  masters  of  economic  science. 
An  effort  has  been  made  to  improve,  to  develop,  and  even  to  correct  the  older 
theories,  but  no  attempt  has  been  made  to  change  their  essential  aspects.     In- 
dividualistic and  liberal  by  tradition,  this  school  has  never  been  optimistic.     It 
lays  no  claim  to  finality  of  doctrine  or  to  the  universality  of  its  aim,  but  simply 
confines  itself  to  pure  science. 

1  Auguate  Comte  and  Positivism. 


358  DECLINE  OF  THE  CLASSICAL  SCHOOL 

In  the  opinion  of  Classical  writers,  free  competition  was  the 
sovereign  natural  law.  It  was  sufficient  for  all  things.  It  secured 
cheapness  for  the  consumer,  and  stimulated  progress  generally  because 
of  the  rivalry  which  it  aroused  among  producers.  Justice  was 
assured  for  all,  and  equality  attained,  for  the  constant  pursuit  of 
profits  merely  resulted  in  reducing  them  to  the  level  of  cost  of 
production.  The  Dictionnaire  d1 Economic  politique  of  1852,  which 
may  perhaps  be  considered  as  the  code  of  Classic  political  economy, 
expressed  the  opinion  that  competition  is  to  the  industrial  world 
what  the  sun  is  to  the  physical.  And  Stuart  Mill  himself,  the  author 
of  Liberty,  no  longer  distinguishing  between  economic  and  political 
liberty,  in  less  poetic  but  equally  conclusive  terms  states  that  "  every 
restriction  of  competition  is  an  evil,"  but  that  "  every  extension  of  it 
is  always  an  ultimate  good."  *  On  this  point  he  was  a  stern  opponent 
of  socialism,  although  in  other  respects  it  possessed  many  attractions 
for  him.  "  I  utterly  dissent,"  says  he,  "  from  the  most  conspicuous 
and  vehement  part  of  their  teaching,  their  declamations  against 
competition." 

But  the  Classical  school,  despite  its  glorification  of  free  com- 
petition, never  had  any  intention  of  justifying  the  present  regime. 
The  complaints  urged  against  it  on  this  score,  like  the  similar  charge 
of  egoism,  are  based  upon  a  misconception.  On  the  contrary,  the 
Classics,  both  new  and  old,  complain  of  the  imperfect  character  of 
competition.  Senior  had  already  pointed  out  what  an  enormous 
place  monopoly  still  holds  in  the  present  regime.  A  regime  of 
absolutely  free  competition  is  as  much  a  dream  as  socialism,  and  it 
is  as  unjust  to  judge  competition  by  the  vices  of  the  existing  order 
as  it  would  be  to  judge  of  collectivism  by  what  occurred  in  the 
State  arsenals. 

(3)  The  Law  of  Population  also  held  an  honourable  place  among 
Classical  doctrines,  so  honourable,  indeed,  that  even  the  Optimists 
never  dared  contradict  it.  And  of  all  economists  Mill  seems  most 
obsessed  by  it.2  In  his  dread  of  its  dire  consequences  he  surpasses 
Malthus  himself.  And  he  reveals  a  far  greater  regard  for  moral 
considerations  than  was  ever  shown  by  the  latter.  Mill  was  already 
a  Neo-Malthusian  in  the  respect  which  he  felt  for  the  rights  and 
liberty  of  women,  which  are  too  seldom  consulted  when  maternity 

1  Principles,  Book IV,  chap.  7,  par.  7  (Ashley's  ed.,  p.  793).  See  the  recent 
work  of  Molinari,  or  La  Morale  de  la  Concurrence,  by  Yves  Guyot. 

1  "  It  is  in  vain  to  say  that  all  mouths  which  the  increase  of  mankind  calls 
into  existence  bring  with  them  hands.  The  new  mouths  require  as  much  food 
as  the  old  ones  and  the  hands  do  not  produce  as  much."  (Principle*,  Book  I, 
chap.  11,  §2.) 


THE  FUNDAMENTAL  LAWS  859 

is  forced  upon  them.1  A  numerous  family  appeared  to  him  as 
vicious  and  almost  as  disgusting  as  drunkenness.*  Time  and  again 
he  declares  that  the  working  classes  can  hope  for  no  amelioration  of 
their  lot  unless  they  check  the  growth  of  population.  One  reason 
for  his  favourable  view  of  peasant  proprietorship  is  the  restraint 
which  it  exercises  upon  the  birth-rate.  "  The  rate  of  increase  of  the 
French  population  is  the  slowest  in  Europe,"  he  writes,  and  this 
result  he  thought  very  encouraging. 

To  exorcise  this  terrible  demon  he  would  even  sacrifice  the 
principle  of  liberty  which  everywhere  else  he  is  at  so  much  pains  to 
defend.  He  was  prepared  to  support  a  law  to  prohibit  the  marriage 
of  indigents,8  a  proposal  to  which  Malthus  was  absolutely  opposed 
His  plea  for  this  measure  of  restraint  is  expounded,  not  in  the 
Principles,  but  in  another  of  bis  works  entitled  Liberty.  It  is,  of 
course,  possible  that  Liberty  may  owe  something  to  the  collaboration 
of  Mrs.  Stuart  Mill. 

(4)  The  Law  of  Demand  and  Supply — the  law  that  determines 
the  value  of  products  and  of  productive  services,  such  as  labour, 
land,  and  capital — is  usually  stated  in  the  following  terms  :  Price 
varies  directly  with  demand,  inversely  with  supply.  One  of  the 
most  important  contributions  which  Mill  made  to  the  science  was  to 
show  that  this  apparently  mathematically  precise  formula  was 
merely  a  vicious  circle.  If  it  be  true  that  demand  and  supply  cause 
a  variation  of  price,  it  is  equally  true  that  price  causes  a  variation  of 
demand  and  supply.  Mill  corrects  the  dictum  by  saying  that  price 

1  "  It  is  seldom  by  the  choice  of  the  wife  that  families  are  too  numerous ;  on 
her  devolves  (along  with  all  the  physical  suffering  and  at  least  a  full  share  of  the 
privations)  the  whole  of  the  intolerable  domestic  drudgery  resulting  from  the 
excess."  (Principles,  Book  II,  chap.  13,  §  2.) 

1  "  While  a  man  who  is  intemperate  in  drink,  is  discountenanced  and  despised 
by  all  who  profess  to  be  moral  people,  it  is  one  of  the  chief  grounds  made  use 
of  in  appeals  to  the  benevolent  that  the  applicant  has  a  large  family  and  is 
unable  to  maintain  them."  (Ibid.,  Book  II,  chap.  13,  §  1.)  "Little  improve- 
ment can  be  expected  in  morality,  until  the  producing  large  families  is  regarded 
with  the  same  feelings  as  drunkenness  or  any  other  physical  excess.  But  while 
the  aristocracy  and  clergy  are  foremost  to  set  the  example  of  this  kind  of  in- 
continence what  can  be  expected  of  the  poor  ?  "  (Ibid.,  Ashley's  ed.,  p.  375,  note.) 

He  complains  that  the  Christian  religion  inculcates  the  belief  that  God  in  His 
wisdom  and  care  blesses  a  numerous  family. 

*  "  The  laws  which  in  many  countries  on  the  Continent  forbid  marriage 
unless  the  parties  can  show  that  they  have  the  means  of  supporting  a  family, 
do  not  exceed  the  legitimate  powers  of  the  State.  They  are  not  objectionable 
as  violations  of  liberty."  (Liberty,  chap.  6.) 

On  the  other  hand  he  thought  that  a  law  which  limited  the  number  of  public- 
houses  involved  a  violation  of  liberty  because  it  meant  treating  the  workers  aa 
children.  (Ibid.,  chap.  5.) 


360  DECLINE  OF  THE  CLASSICAL  SCHOOL 

is  fixed  at  a  margin  where  the  quantity  offered  is  equal  to  the 
quantity  demanded.  All  price  variations  move  about  this  point, 
just  as  the  beam  of  a  balance  oscillates  about  a  point  of  equilibrium.1 
He  thus  gave  to  the  law  of  demand  and  supply  a  scientific  precision 
which  it  formerly  lacked,  and  by  substituting  the  conception  of 
equilibrium  for  the  causal  relation  he  introduced  a  new  principle  into 
economics  which  was  destined  to  lead  to  some  important  modifications. 

The  law  of  demand  and  supply  explains  the  variations  of  value, 
but  fails  to  illuminate  the  conception  of  value  itself.  A  more 
fundamental  cause  must  be  sought,  which  can  be  found  in  cost  of 
production.  Under  a  regime  of  free  competition  the  fluctuations  in 
value  tend  toward  this  fixed  point,  just  as  "  the  sea  tends  to  a  level ; 
but  it  never  is  at  one  exact  level."  * 

A  temporary,  unstable  value  dependent  upon  the  variations  of 
demand  and  supply,  a  permanent,  natural,  or  normal  value  regulated 
by  cost  of  production,  such  was  the  Classical  law  of  value.  Mill  was 
entirely  satisfied  with  it,  as  will  be  seen  from  the  following  phrase, 
which  seems  rather  strange,  coming  from  such  a  cautious  philosopher. 
"  Happily,"  says  he,  "  there  is  nothing  in  the  laws  of  value  which 
remains  for  the  present  or  any  future  writer  to  clear  up  ;  the  theory 
of  the  subject  is  complete."  8 

The  law  which  regulates  the  value  of  goods  applies  also  to  the 
value  of  money.  Money  also  has  a  temporary  value,  determined  by 
the  quantity  in  circulation  and  the  demand  for  it  for  exchange 
purposes — the  celebrated  quantity  theory.  But  it  also  has  a  natural 
value,  determined  by  the  cost  of  production  of  the  precious  metals. 

(5)  The  Law  of  Wages.  A  similar  law  determined  wages — the 
price  of  hand-labour.  Here  again  is  a  double  law.  Temporary 
wages  depend  upon  demand  and  supply — understanding  by  supply 
the  quantity  of  capital  available  for  the  upkeep  of  the  workers,  the 
wages  fund,  and  by  demand  the  number  of  workers  in  search  of 
employment.4  This  law  was  more  familiarly  expressed  by  Cobden 

1  "  The  rise  or  the  fall  continues  until  the  demand  and  supply  are  again  equal 
to  one  another  :  and  the  value  which  a  commodity  will  bring  in  any  market  is  no 
other  than  the  value  which  in  that  market  gives  a  demand  just  sufficient  to 
carry  off  the  existing  or  expected  supply."  (Principles,  Book  III,  chap.  2,  §  4.) 

Cournot  in  his  criticisms  of  the  law  of  demand  and  supply  had  anticipated 
Mill.  But  it  is  very  probable  that  Mill  was  not  acquainted  with  the  Recherches. 

*  Principles,  Book  III,  chap.  3,  §  1, 

3  Ibid.,  Book  III,  chap.  1,  §  1. 

4  "  Wages  depend,  then,  on  the  proportion  between  the  number  of  the 
labouriag  population  and  the  capital  or  other  funds  devoted  to  the  purchase 
of  labour,  and  cannot  under  the  rule  of  competition  be  affected  by  anything  else." 
(Hi 2.,  Book  II,  chap.  11,  parts  1  and  3.) 


THE  FUNDAMENTAL  LAWS  561 

when  he  said  that  wages  rose  whenever  two  masters  ran  after  the 
same  man,  and  fell  whenever  two  men  ran  after  the  same  master. 

Natural  or  subsistence  wages  in  the  long  run  are  determined  by 
the  cost  of  production  of  labour — by  the  cost  of  rearing  the  worker. 
The  oscillations  of  temporary  wages  always  tend  to  a  position  of 
equilibrium  about  this  point. 

This  "brazen  law,"  as  L assail e  calls  it,  well  deserves  its  title. 
According  to  it  wages  depend  entirely  upon  causes  extraneous  to  the 
worker,  and  bear  no  relation  either  to  his  need  or  to  the  character  of 
his  work  or  his  willingness  to  perform  it.  He  is  at  the  mercy  of  a 
fatalistic  law,  and  is  as  helpless  to  influence  his  market  as  a  bale  of 
cotton.  And  not  only  is  the  law  independent  of  him,  but  no  inter- 
vention, legal  or  otherwise,  no  institution,  no  system,  can  alter  this 
state  of  things  without  influencing  one  or  other  of  the  two  terms  of 
the  equation,  the  quantity  of  capital  employed  as  wages — the  wage 
fund— or  the  numbers  of  the  working  population  in  search  of  work. 
"  Every  plan  of  amelioration  which  is  not  founded  upon  this  principle 
is  quite  illusory."  Only  by  encouraging  the  growth  of  capital  by 
means  of  saving,  or  by  discouraging  the  growth  of  population  and 
restraining  the  sexual  instinct,  can  the  terms  of  the  equation  be 
favourably  modified.  Upon  final  analysis  there  are  only  two 
chances  of  safety  for  the  workers,  and  of  these  the  first  is  beyond 
their  power,1  while  the  second  means  the  condemnation  to  celibacy 
or  onanism  of  all  proletarians,  as  they  are  ironically  called. 

And  thus  Mill,  who  formulated  the  law  with  greater  rigour  than 
any  of  his  predecessors,  found  himself  alarmed  at  its  consequences. 
He  was  specially  impressed  by  the  courageous  but  impotent  efforts 
of  trade  unionism,  then  at  the  beginning  of  its  career.  Mill  and  the 
economists  of  the  Liberal  school  were  as  strongly  in  favour  of  the 
removal  of  the  Combination  Laws  as  they  were  persistent  in  their 
demands  for  the  repeal  of  the  Corn  Laws ;  but  of  what  use  was  the 
right  of  association  and  combination  when  a  higher  law  frustrated 
every  attempt  to  raise  wages  ?  Just  at  this  time  Longe,  writing  in 
1866,  and  Thornton,  in  his  volume  on  Labour,  began  to  question  the 
validity  of  the  wage  fund  theory.  They  experienced  no  difficulty  in 
converting  John  Stuart  Mill,  who  followed  with  his  famous  recanta- 
tion in  the  pages  of  the  Fortnightly.  His  defection  caused  a  remark- 
able stir,  and  was  thought  almost  an  offence  against  the  sacred 

1  Saving  with  a  view  to  augmenting  the  wages  fund  is  only  possible  for  the 
rich,  and  Mill  is  as  insistent  upon  their  doing  it  as  he  is  upon  the  workers  refraining 
from  marriage.  He  also  tries  to  impress  upon  the  workers  the  importance  of 
saving,  but  his  way  of  showing  its  advantages  is  often  laborious  and  obscure. 


362  DECLINE  OF  THE  CLASSICAL  SCHOOL 

traditions  of  the  Classical  school.  The  conversion  was  not  quite 
complete,  however,  for  the  last  edition  of  the  Principles  still  contains 
the  passages  we  have  already  quoted,  as  well  as  others  equally 
discouraging  to  the  working  classes,  and  equally  fatal  to  the  hopes 
which  they  had  reasonably  placed  in  their  own  efforts.1 

The  wage  fund  theory,  though  badly  shaken  as  a  result  of  Mill's 
defection,  was  not  abandoned  by  all  the  Classical  writers,  and  some 
recent  American  publications  have  attempted  a  revival  of  it.* 

(6)  The  Law  of  Rent.     The  law  of  competition  tends  to  reduce 
the  selling  price  until  it  is  equal  to  the  cost  of  production.     But 
suppose,  as  is  often  the  case,  that  there  are  two  costs  of  production, 
which  of  the  two  will  determine  the  price  ?     The  higher  will  be  the 
determinant,  and  so  there  exists  a  margin  for  all  similar  products 
whose  cost  of  production  is  less.     Ricardo  showed  that  this  was  the 
case  with  agricultural  products  as  well  as  with  certain  manufactured 
goods.8     Mill  included  personal  ability,  and  though  the  conception 
of  rent  was  thus  very  considerably  extended,  it  had  not  the  scope 
which  it  had  with  Senior. 

(7)  The  Law  of  International  Exchange.    According  to  the  Liberal 

1  Stuart  Mill  admitted  that  trade  unions  might  modify  the  relations  between 
demand  and  supply,  forgetting  for  the  moment  that  this  meant  a  contradiction 
of  the  Classical  theory. 

The  unions  might  limit  the  number  of  available  men.  He  feared  that  this 
would  result  in  high  wages  for  the  small  number  of  organised  labourers  and  in  low 
wages  for  the  others.  They  might  check  the  birth-rate,  their  members  becoming 
accustomed  to  such  a  degree  of  comfort  and  well-being  as  would  raise  their 
standard  of  life.  He  was  always  a  strict  Maltkusian. 

1  See  the  quarterlies  of  Harvard  and  Columbia.  It  was  an  American,  how- 
ever, Francis  Walker,  in  his  Wages  Question  (1876),  who  did  more  than  anyone 
to  destroy  the  old  wage  fund  theory. 

»  "  The  cost  value  of  a  thing  means  the  cost  value  of  the  most  costly  portion 
of  it."  (Principles,  Book  III,  chap.  6,  §  1,  prop.  7.) 

"  The  eztra  gains  which  any  producer  or  dealer  obtains  through  superior 
talents  for  business  or  superior  business  arrangements  are  very  much  of  a  similar 
kind.  If  all  his  competitors  had  the  same  advantages,  and  used  them,  the  benefit 
would  be  transferred  to  their  customers  through  the  diminished  value  of  the 
article  :  he  only  retains  it  for  himself  because  he  is  able  to  bring  his  commodity  to 
market  at  a  lower  cost  while  its  value  is  determined  by  a  higher."  (Ibid., 
Book  in,  chap.  5,  §4.) 

Senior  had  already  emphasised  one  important  difference  between  agricultural 
and  industrial  production,  namely  that  whilst  the  law  of  diminishing  returns 
operates  in  the  former  case,  the  law  of  increasing  returns  is  operative  in  the 
second.  In  other  words,  the  cost  of  production  diminishes  as  the  quantity 
produced  increases.  The  result  is,  as  Mill  points  out  elsewhere,  that  the 
industrial  employer  is  anxious  to  reduce  the  sale  price  in  order  to  produce 
more  and  to  recoup  himself  for  a  reduction  in  price  by  a  reduced  cost  of 
production. 


THE  FUNDAMENTAL  LAWS  863 

economists  Ricardo  and  Dunoyer  (see  p.  346),  international  trade  is 
subject  to  the  laws  regulating  individual  exchange,  and  the  results 
in  the  two  cases  are  almost  identical,  namely,  a  saving  of  labour  to 
both  parties.  One  party  exchanges  a  product  which  has  cost  fifteen 
hours'  labour  for  another  which,  had  an  attempt  been  made  to 
produce  it  directly,  would  have  involved  a  labour  of  twenty  hours. 
The  gain  is  credited  to  the  importing  side,  for  exportation  is  merely 
the  means  whereby  it  is  obtained.  Its  measure  is  the  excess  of  the 
imported  value  over  the  value  exported. 

It  is  clear  that  each  party  gains  by  the  transaction.  It  is  not 
quite  clear,  nor  is  it  altogether  probable,  that  the  advantages  are 
equally  distributed.  But  it  is  generally  believed  that  if  any  inequality 
does  exist  the  greater  gain  goes  to  the  poorer  country — to  the  one 
that  is  less  gifted  by  nature  or  less  fitted  for  industrial  life.  The 
latter  country  by  very  definition  would  experience  great  difficulty 
in  attempting  the  direct  production  of  the  imported  goods,  and  would 
even,  perhaps,  find  it  quite  impossible.  On  this  point  the  English 
Classical  or  the  Manchester  school  is  iri  complete  agreement  with 
the  French  school.1 

It  might  possibly  be  pointed  out  that  under  a  regime  of  free 
competition  all  values  would  be  reduced  to  the  level  of  cost  of 
production,  and  products  would  be  exchanged  in  such  a  fashion 
that  a  given  quantity  of  labour  embodied  in  one  commodity  would 
always  exchange  for  an  equal  quantity  embodied  in  any  other.  But 
in  such  a  case  where  would  be  the  advantage  of  exchanging  ? 
Ricardo  had  already  anticipated  this  objection,  and  had  shown  that 
if  the  rule  of  equal  quantity  in  exchange  for  equal  quantity  were 
true  of  exchange  between  individuals,  it  did  not  hold  of  exchange 
between  different  countries,  for  the  equalising  action  of  competition 
no  longer  operated,  because  of  the  difficulty  of  moving  capital  and 
labour  from  one  to  the  other.  A  comparison  should  be  made,  not 

1  Ricardo,  moreover,  gives  an  exposition  of  the  advantages  of  international 
trade  in  terms  that  Bastiat  might  have  adopted.  "  Under  a  system  of  perfectly 
free  commerce  each  country  naturally  devotes  its  capital  and  labour  to  such 
employments  as  are  most  beneficial  to  each.  This  pursuit  of  individual  advantage 
is  admirably  connected  with  the  universal  good  of  the  whole.  By  stimulating 
industry,  by  rewarding  ingenuity,  and  by  using  most  efficaciously  the  peculiar 
powers  bestowed  by  nature,  it  distributes  labour  most  effectively  and  most 
economically :  while  by  increasing  the  general  mass  of  productions  it  diffuses 
general  benefit  and  binds  together,  by  one  common  tie  of  interest  and  intercourse, 
the  universal  society  of  nations  throughout  the  civilised  world.  It  is  this  principle 
which  determines  that  wine  shall  be  made  in  France  and  Portugal,  that  corn  shall 
be  grown  in  America  and  Poland,  and  that  hardware  and  other  goods  shall  be 
manufactured  in  England."  (Ricardo,  Worh,  p.  75.) 


364          DECLINE  OF  THE  CLASSICAL  SCHOOL 

of  the  respective  costs  of  the  same  product  in  the  two  countries,  but 
of  the  respective  costs  of  the  imported  and  the  exported  products  in 
the  same  country.  Another  buttress  to  strengthen  the  theory 
which  measures  the  advantages  of  international  commerce  by  the 
amount  of  labour  economised  1 1 

But  the  value  of  the  exchanged  product  is  still  undetermined.  It 
lies  somewhere  between  the  real  cost  of  production  of  the  goods 
exported  and  the  virtual  cost  of  production  of  the  goods  imported, 
in  such  a  way  that  each  country  gains  something.  That  is  all  we 
are  able  to  say.  Mill  has  gone  a  step  farther.  He  has  abandoned 
the  comparison  of  costs  of  production,  which  is  purely  abstract,  and 
can  afford  no  practical  measure  of  the  advantages,  preferring 
to  measure  the  value  of  the  imported  product  by  the  value  of  the 
product  which  must  be  given  in  exchange  for  it.2  We  require  to 
find  the  causes  that  enable  a  country  like  England  to  obtain  a  greater 
or  a  lesser  quantity  of  wine  in  exchange  for  her  coal.  In  other  words, 
the  law  of  international  values  no  longer  involves  a  comparison  of 
costs  of  production,  but  is  simply  the  law  of  demand  and  supply. 
The  prices  of  the  two  goods  arrange  themselves  in  such  a  fashion 
that  the  quantities  demanded  by  the  respective  countries  exactly 
balance.  If  there  is  a  greater  demand  for  coal  in  France  than  there 
is  for  wine  in  England,  England  will  obtain  a  great  quantity  of  wine 
in  exchange  for  her  coal,  and  will  consequently  find  herself  in  a  very 
advantageous  position. 

Mill's  theory 3  constitutes   a  real  advance  as   compared   with 

1  The  following  apparent  paradox  may  be  deduced  from  Ricardo's  theory. 
A  country  is  wise  in  importing  not  only  those  commodities  which  it  can  only 
produce  at  a  disadvantage  as  compared  with  its  rivals,  but  also  those  goods  in 
which  it  has  a  distinct  advantage  in  the  matter  of  production,  though  not  so 
great  as  the  advantage  enjoyed  in  some  other  case.  Under  those  circumstances 
it  is  better  that  it  should  produce  that  product  in  the  making  of  which  it  has  the 
greater  advantage  and  exchange  it  for  some  other  product  in  which  it  has  less. 

"  Two  men  can  both  make  shoes  and  hats,  and  one  is  superior  to  the  other 
in  both  employments ;  but  in  making  hats,  he  can  only  exceed  his  competitor 
by  one-fifth,  or  20  per  cent.,  and  in  making  shoes  he  can  excel  him  by  one-third, 
or  33  per  cent.  Will  it  not  be  for  the  interest  of  both,  that  the  superior  man 
should  employ  himself  exclusively  in  making  shoes,  and  the  inferior  man  in  making 
hats."  (Ricardo,  Works,  p.  77,  note.) 

And  so  England  might  find  it  advantageous  to  exchange  her  coal  for  French 
cloths,  although  she  may  be  able  to  produce  those  cloths  cheaper  herself. 

1  "  The  value  of  a  thing  in  any  place  depends  on  the  cost  of  its  acquisition 
in  that  place  ;  which  in  the  case  of  an  imported  article  means  the  cost  of  pro* 
duction  of  the  thing  which  is  exported  to  pay  for  it."  (Principles,  Book  III, 
chap.  18,  §  1.) 

1  Mill  first  treated  of  the  theory  in  his  Unsettled  Questions  of  Political  Economy. 
A  more  complicated  but  more  precise  exposition  is  given  in  the  Principle* 


THE  FUNDAMENTAL  LAWS  865 

Ricardo's,  for  it  affords  a  means  of  gauging  the  strength  of  the  foreign 
demand,  and  of  judging  of  the  circumstances  favourable  to  a  good 
bargain.  Mill  was  of  the  opinion  that  a  poor  country  stood  to  benefit 
most  by  the  transaction — thus  confirming  Bastiat's  belief.  A  rich 
country  will  always  have  to  pay  more  for  its  goods  than  a  poor  one.1 

Protectionists  affect  the  opposite  belief,  holding  that  it  is  the 
poor  country  that  is  duped.  The  English  trade  with  Portugal  is 
one  of  their  favourite  illustrations.  But  it  is  simply  an  illustration, 
and  it  can  never  take  the  place  of  actual  proof. 

Notwithstanding  these  divergent  views,  Mill  is  more  sympathetic 
to  the  Protectionists  than  any  other  economist  of  the  Liberal  school. 
His  theory  provides  them  with  at  least  one  excellent  argument. 
Seeing  that  the  advantages  of  international  commerce  depend  upon 
demand  and  supply,  a  country  may  make  it  operate  to  its  own 
advantage  by  merely  pursuing  a  different  policy.  New  industries 
might  be  developed  whenever  there  is  a  considerable  demand  for 
new  products,  and  that  demand  might  easily  be  so  considerable  that 
the  price  would  be  lowered.2  Mill  recognises  the  justice  of  merely 
temporary  protection,  set  up  with  a  view  to  naturalising  a  new 
industry,  and  considers  it  logically  deducible  from  his  principles.8 

Although  Mill  may  in  this  way  have  done  something  to  lighten 
the  task  of  the  Protectionists,  we  must  never  forget  that  he  himself 

Book  III,  chap.  18,  §  7.  The  whole  process  of  reasoning,  based  as  it  is  upon 
the  hypothetical  conduct  of  two  persons,  is  purely  abstract,  and  is  of  very  little 
practical  use.  What  is  really  important  is  to  know  the  relation  between  the 
advantages  gained  by  either  side.  It  is  true  that  on  the  whole  imports  and  ex- 
ports balance  one  another,  thanks  to  the  operation  of  money,  but  that  is  another 
question. 

1  "  It  still  appears,  that  the  countries  which  carry  on  their  foreign  trade  on  the 
most  advantageous  terms  are  those  whose  commodities  are  most  in  demand  by 
foreign  countries,  and  which  have  themselves  the  least  demand  for  foreign 
commodities,  from  which,  among  other  consequences,  it  follows  that  the  richest 
countries,  ceteris  paribus,  gain  the  least  by  a  given  amount  of  foreign  commerce, 
since,  having  a  greater  demand  for  commodities  generally  they  are  likely  to 
have  a  greater  demand  for  foreign  commodities  and  thus  modify  the  terms  of 
interchange  to  their  own  disadvantage."  (Principles,  Book  III,  chap.  18,  §  8.) 
Note  the  phrase  "  a  given  amount  of  foreign  commerce."  That  is,  although  the 
rate  of  interchange  is  less  advantageous  for  the  rich  country  than  it  is  for  the 
poor,  still,  since  the  former  exchanges  much  more  than  the  latter  it  gains  more 
on  the  whole  transaction.  Mill  states  this  expressly  elsewhere.  The  rich  and 
the  poor  country  are  like  the  wholesale  house  and  the  Kttle  shop.  The  former 
gains  very  little  on  each  article  sold,  but  gains  much  on  the  whole  turnover. 

•  Ibid.,  Book  V,  chap.  10,  §  1. 

1  An  even  more  important  concession  to  the  Protectionist  view  is  his  ad- 
mission that  the  duties  are  not  always  borne  by  the  home  consumer  in  the  form 
of  higher  prices,  but  that  they  are  sometimes  paid  by  the  foreigner. 


366          DECLINE  OF  THE  CLASSICAL  SCHOOL 

remained  an  entirely  faithful  adherent  of  the  Free  Trade  doctrine 
and,  except  in  the  case  of  infant  industries,  vigorously  denounced 
all  protective  rights.  "  All  is  sheer  loss.  .  .  .  They  prevent  the 
economy  of  labour  and  capital,  thereby  annihilating  a  general  gain 
to  the  world  which  would  be  shared  in  some  proportion  between 
itself  and  other  countries."  * 

The  Free  Trade  doctrine  has  not  remained  where  it  was  any 
more  than  the  other  special  doctrines  of  the  Classical  school.  It 
gave  birth  to  one  of  the  most  powerful  movements  in  economic 
history,  which  led  to  the  famous  law  of  June  25,  1846,  abolishing 
import  duty  on  corn.  This  law  was  followed  by  others,  and  ended 
in  the  complete  removal  of  all  tariff  barriers.  But  the  eloquence  of 
Cobden,  of  Bright,  and  of  others  was  necessary  before  it  was  accom- 
plished. A  national  Anti-Corn  League  had  to  be  organised,  no  less 
than  ten  Parliamentary  defeats  had  to  be  endured,  the  allegiance 
of  Peel  and  the  approval  of  the  Duke  of  Wellington  had  to  be  secured 
before  they  were  removed.  All  this  even  might  have  proved  futile 
but  for  the  poor  harvest  of  1845.  This  glorious  campaign  did  more 
for  the  triumph  of  the  Liberal  economic  school  and  for  the  dissemina- 
tion of  its  ideas  than  all  the  learned  demonstrations  of  the  masters. 
Fourteen  years  were  still  to  elapse  before  Cobden  and  Michel  Chevalier 
were  able  to  sign  the  treaty  of  1860.  Even  this  was  due  to  a 
personal  act  of  Napoleon  III,  and  Cobden  was  not  far  wrong  when 
he  declared  that  nine-tenths  of  the  French  nation  was  opposed  to  it. 

II :  MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME 

SUCH  were  the  doctrines  taught  by  the  Classical  school  about  the 
middle  of  the  nineteenth  century.  The  writers  in  question,  however, 
strongly  objected  to  the  term  "  school,"  believing  that  they  them- 
selves were  the  sole  guardians  of  the  sacred  truth.  And  we  must 
admit  that  their  doctrines  are  admirably  interwoven,  and  present  an 
attractive  appearance.  On  the  other  hand,  it  must  be  confessed  that 
the  prospects  which  they  hold  out  for  anyone  not  a  member  of  the 
landowning  class  are  far  from  attractive.  For  the  labourer  there 
is  promise  of  daily  toil  and  bare  existence,  and  at  best  a  wage 
determined  by  the  quantity  of  capital  or  the  numbers  of  the 
population — causes  which  are  clearly  beyond  the  workers'  influence, 
and  even  beyond  the  assuaging  influence  of  association  and  combina- 
tion. And  although  the  latter  rights  are  generously  claimed  for  the 

1  PrincifAes,  Book  V,  chap.  10,  §  1.  The  duty  would  check  the  demand  of  the 
importing  country,  and  according  to  Mill's  own  formula  it  ought  to  modify  the 
exchange  equation  in  its  favour. 


MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME     367 

workers,  the  occasional  antagonism  between  masters  and  men 
presages  the  eternal  conflict  between  profits  and  wages.  The 
possession  of  land  is  a  passport  to  the  enjoyment  of  monopolistic 
privileges,  which  the  right  of  free  exchange  can  only  modify  very 
slightly.  Rent — the  resultant  of  all  life's  favourable  chances — 
reserved  for  those  who  need  it  least,  monopolises  a  growing  propor- 
tion of  the  national  revenue.  Intervention  for  the  benefit  of  the 
worker,  whether  undertaken  by  the  State  or  by  some  other  body,  is 
pushed  aside  as  unworthy  of  the  dignity  of  labour  and  harmful  to 
its  true  interests.  "  Each  for  himself  "  is  set  up  as  a  principle  of 
social  action,  in  the  vain  hope  that  it  would  be  spontaneously 
transformed  into  the  principle  of  "Each  for  all."  The  search  for 
truth  was  the  dominant  interest  of  the  school,  and  these  doctrines 
were  preached,  not  for  the  pleasure  they  yielded,  but  as  the  dicta  of 
exact  science.  Little  wonder  that  men  were  prepared  to  fight  before 
they  would  recognise  these  as  demonstrable  truths.  And  just  as  it 
was  Mill  who  so  powerfully  helped  to  consolidate  and  complete  the 
science  of  economics  that  Cossa  refers  to  his  Principles  as  the  best 
resume,  the  fullest,  most  complete  and  most  exact  exposition  of  the 
doctrines  of  the  Classical  school  that  we  have,1  it  was  Mill  also  who, 
in  successive  editions  of  his  book,  and  in  his  other  and  later  writings, 
pointed  out  the  new  vistas  opening  before  the  science,  freed  the 
doctrine  from  many  errors  to  which  it  was  attached  and  set  its  feet 
on  the  paths  of  Liberal  Socialism. 

We  might  say  without  any  suggestion  of  bias  that  Mill's  evolution 
was  largely  influenced  by  French  ideas.*  A  singularly  interesting 
volume  might  be  written  in  illustration  of  this  statement.  Without 
referring  to  the  influence  of  Comte,  which  Mill  was  never  tired  of 
recognising,  and  confining  our  attention  only  to  economics,  he  has 
himself  acknowledged  his  debt  to  the  Saint-Simonians  for  the  greater 
part  of  his  doctrines  of  heredity  and  unearned  increment,  to  Sismondi 
for  his  sympathy  with  peasant  proprietorship,  and  to  the  socialists 
of  1848  for  his  faith  in  co-operative  association  as  a  substitute  for  the 
wage  nexus. 

It  would  hardly  be  true  to  say  that  Mill  became  a  convert  to 
socialism,  although  he  showed  himsplf  anxious  to  defend  it  against 
every  undeserved  attack.  To  those  who  credit  socialism  with  a 
desire  to  destroy  personal  initiative  or  to  undermine  individual 

1  Histoire  des  Doctrines  faonomiques,  p.  338. 

*  Mill  was  for  many  years  resident  in  France,  and  died  at  Avignon.  An  article 
written  by  him  in  defence  of  the  Revolution  of  1848  has  been  translated  into 
French  and  published  in  book  form  by  M.  Sadi  Carnot. 


368          DECLINE  OF  THE  CLASSICAL  SCHOOL 

liberty  he  disdainfully  points  out  that  "  a  factory  operative  has  less 
personal  interest  in  his  work  than  a  member  of  a  communist  associa- 
tion, since  he  is  not,  like  him,  working  for  a  partnership  of  which 
he  is  himself  a  member,"  and  that  "  the  restraints  of  communism 
would  be  freedom  in  comparison  with  the  present  condition  of  the 
majority  of  the  human  race."  x  And  although  he  expresses  the 
belief  that  "  communism  would  even  now  be  practicable  among  the 
ilite  of  mankind,  and  may  become  so  among  the  rest,"  and  hopes  that 
one  day  education,  habit,  and  culture  will  so  alter  the  character  of 
mankind  that  digging  and  weaving  for  one's  country  will  be  considered 
as  patriotic  as  to  fight  for  it,1  still  he  was  far  from  being  a  socialist. 
Free  competition,  he  thought,  was  an  absolute  necessity,  and  there 
could  be  no  interference  with  the  essential  rights  of  the  individual. 

The  first  blow  which  he  dealt  at  the  Classical  school  was  to 
challenge  its  belief  in  the  universality  and  permanence  of  natural 
law.  He  never  took  up  the  extreme  position  of  the  Marxian  and 
Historical  schools,  which  held  that  the  so-called  natural  laws  were 
merely  attempts  at  describing  the  social  relations  which  may  exist  at 
certain  periods  in  economic  history,  but  which  change  their  character 
as  time  goes  on.  He  draws  a  distinction  between  the  laws  which 
obtain  in  the  realm  of  production  and  those  that  regulate  distribu- 
tion. Only  in  the  one  case  can  we  speak  of  "  natural  "  laws  ;  in  the 
other  they  are  artificial — created  by  men — and  capable  of  being 
changed,  should  men  desire  it.3  Contrary  to  the  opinion  of  the 
Classical  school,  he  tries  to  show  that  wages,  profits,  and  rent  are 
not  determined  by  immutable  laws  against  which  the  will  of  man 
can  never  prevail. 

The  door  was  thus  open  for  social  reform,  which  was  no  small 
triumph.  Of  course  it  cannot  be  said  of  the  Classical  school,  or 
even  of  the  Optimists,  that  they  were  prepared  to  deny  the  possibility 
or  the  efficacy  of  every  measure  of  social  reform,  but  it  must  be 
admitted  that  they  were  loath  to  encourage  anything  beyond 
private  effort,  or  to  advocate  the  abolition  of  any  but  the  older 
laws.  Braun,  speaking  at  a  conference  of  Liberal  economists  at 
Mayence  in  1869,  expressed  the  opinion  that  "  that  conference  had 
given  rise  to  much  opposition  because  it  upheld  the  principle  that 

1  Principles,  p.  210.  '  Representative  Government,  chap.  3. 

*  "The  laws  and  conditions  of  the  production  of  wealth  partake  of  the 
character  of  physical  truths.  There  is  nothing  optional  or  arbitrary  in  them.  .  .  . 
It  is  not  so  with  the  distribution  of  wealth.  This  is  a  matter  of  human  institution 
solely.  The  things  once  there,  mankind,  individually  or  collectively,  can  do  with 
them  as  they  like."  (Principles,  Book  n,  chap.  1,  §  Ij)  Karl  Marx,  a  little 
later  than  this,  claimed  that  distribution  is  wholly  determined  by  production. 


MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME    369 

human  legislation  can  never  change  the  eternal  laws  of  nature, 
which  alone  regulate  every  economic  action."  Similar  declarations 
abound  in  the  French  works  of  the  period.  But,  thanks  to  the 
distinction  drawn  by  Mill,  all  this  was  changed.  Though  the  legislator 
be  helpless  to  modify  the  laws  of  production,  he  is  all-powerful  in  the 
realm  of  distribution,  which  is  the  real  battle-ground  of  economics. 

But,  as  a  matter  of  fact,  Mill's  distinction  is  open  to  criticism, 
especially  his  method  of  stating  it ;  and  we  feel  that  he  is  unjust  to 
himself  when  he  regards  this  as  his  most  important  and  most 
original  contribution  to  economic  science.  Production  and  dis- 
tribution cannot  be  treated  as  two  separate  spheres,  for  the  one 
invariably  involves  the  other.  And  Mill  himself  is  forced  to  abandon 
his  own  thesis  when  he  advocates  the  establishment  of  co-operative 
associations  or  peasant  proprietorship,  for  each  of  these  belongs  as 
much  to  the  domain  of  production  as  to  that  of  distribution. 
Rodbertus,  at  almost  the  same  period,  gave  a  much  truer  expression 
to  Mill's  thought  by  emphasising  the  distinction  which  exists  between 
economic  and  legal  ties.1  Even  these  may  mutually  involve  one 
another;  still  we  know  that  the  economic  laws  which  regulate 
exchange  value  or  determine  the  magnitude  of  industrial  enterprise 
are  not  of  the  same  kind  as  the  rules  of  law  which  regulate  the  transfer 
of  property  or  lay  down  the  lines  of  procedure  for  persons  bound  by 
agreement  concerning  wages,  interest,  or  rent.  The  first  may  well 
be  designated  natural  laws,  but  the  latter  are  the  work  of  a  legislative 
authority. 

Stuart  Mill,  not  content  with  merely  opening  the  door  to  reform, 
deliberately  enters  in,  and,  in  striking  contrast  to  the  economists  of 
the  older  school,  outlines  a  comprehensive  programme  of  social 
policy,  which  he  formulates  thus  : 2  "  How  to  unite  the  greatest 
individual  liberty  of  action,  with  a  common  ownership  in  the  raw 
material  of  the  globe,  and  an  equal  participation  of  all  in  the 
benefits  of  combined  labour." 

We  may  summarise  his  proposals  as  follows  : 

(1)  Abolition  of  the  wage  system  and  the  substitution  of  a 
co-operative  association  of  producers. 

(2)  The  socialisation  of  rent  by  means  of  a  tax  on  land. 

(3)  Lessening 'of  the  inequalities  of  wealth  by  restrictions  on  the 
rights  of  inheritance. 

This  threefold  measure  of  reform  possesses  all  the  desiderata  laid 
down  by  Mill.  Moreover,  it  does  not  conflict  with  the  individualistic 

1  See  Chatelain'e  introd  action  to  RodbertaB'e  KapUaL 
•  Seo  Autobiography,  P-  133  ("Popular  "  edition). 


370          DECLINE  OF  THE  CLASSICAL  SCHOOL 

principle,  but  would  somewhat  strengthen  it.     It  involves  no  personal 
constraint,  but  tends  to  extend  the  bounds  of  individual  freedom. 
Let  us  briefly  review  these  projects  seriatim. 

(1)  Mill  thought  that  the   wages   regime  was    detrimental    to 
individuality  because  it  deprived  man  of  all  interest  in  the  product 
of  his  labour,  with  the  result  that  a  vast  majority  of  mankind  is  living 
under  conditions  which  socialism  could  not  possibly  make  much  worse. 

It  is  necessary  to  replace  this  condition  of  things  by  "  a  form  of 
association  which,  if  mankind  continue  to  improve,  must  be  expected 
in  the  end  to  predominate,  and  is  not  that  which  can  exist  between  a 
capitalist  as  chief  and  workpeople  without  a  voice  in  the  manage- 
ment, but  the  association  of  the  labourers  themselves  on  terms  of 
equality,  collectively  owning  the  capital  with  which  they  carry  on 
their  operations,  and  working  under  managers  elected  and  removable 
by  themselves."  x  This  noble  ideal  of  a  co-operative  community 
was  borrowed,  not  from  Owen,  but  from  the  French  socialists. 
Mill  had  already  eulogised  the  French  movement,  even  before  its 
brilliant  but  ephemeral  triumph  in  1848.  He  was  not  the  only  one  to 
be  attracted  by  the  idea  of  a  co-operative  community,  for  the  English 
Christian  Socialists  drew  their  inspiration  from  the  same  source. 

Mill  lived  long  enough  to  witness  the  decline  of  co-operative 
production  in  England,  and  of  the  Co-operative  Consumers'  Union 
in  France,  but  neither  failure  seems  to  have  had  any  influence  upon 
his  projects.2  Whatever  the  method  might  be,  the  object  in  his 
ideal  was  always  the  same,  the  self-emancipation  of  the  workers. 

(2)  The  rent  of  land,  which  Ricardo  and  his  disciples  accepted  as 
a  natural  if  not  as  a  necessary  phenomenon,  appeared  to  Mill  as  an 

1  "  If  the  improvement  which  even  triumphant  military  despotism  has  only 
retarded,  not  stopped,  shall  continue  its  course  there  can  be  little  doubt  that  the 
status  of  hired  labourers  will  gradually  tend  to  confine  itself  to  the  description 
of  workpeople  whose  low  moral  qualities  render  them  unfit  for  anything  more 
independent,  and  that  the  relation  of  masters  and  workpeople  will  be  gradually 
superseded  by  partnership  in  one  of  two  forms  :  in  some  cases,  association  of  the 
labourers  with  the  capitalist ;  in  others,  and  perhaps  finally  in  all,  association  of 
labourers  among  themselves."  (Principles,  Book  IV,  chap.  7,  §  4.) 

"  In  this  or  some  such  mode,  the  existing  accumulations  of  capital  might 
Honestly  and  by  a  kind  of  spontaneous  process  become  in  the  end  the  joint 
property  of  all  who  participate  in  their  productive  employment — a  transformation 
which,  thus  effected,  would  be  the  nearest  approach  to  social  justice  and  the 
most  beneficial  ordering  of  industrial  affairs  for  the  universal  good  which  it  is 
possible  at  present  to  foresee."  (Ibid.,  Book  IV,  chap.  7,  §  6.) 

1  The  co-operative  movement  probably  suggested  this  idea  to  him.  He 
several  times  times  expresses  the  opinion  that  middlemen's  profits  exceed  those 
of  the  capitalists,  and  that  the  working  class  would  gain  more  by  the  removal  of 
the  former  than  they  would  by  the  extinction  of  the  latter. 


MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME     371 

abnormal  fact  which  was  as  detrimental  to  individuality  as  the 
wage  system  itself.  Its  peculiar  danger  was,  of  course,  not  quite 
the  same.  What  rent  did  was  to  secure  to  certain  individuals 
something  which  was  not  the  result  of  their  own  efforts,  whereas 
individualism  always  aimed  at  securing  for  everyone  the  fruits  of  his 
own  labour — suum  cuigue.  On  the  principle  of  giving  to  each  what 
each  produced,  everything  not  directly  produced  by  man  himself 
was  to  be  restored  to  the  community.  It  is  immaterial  whether 
this  extra  product  is  due  to  the  collaboration  of  nature,  as  Smith 
and  the  Physiocrats  believed,  or  whether  it  is  the  result  of  the 
pressure  of  population,  as  Ricardo  and  Malthus  thought,  or  the 
mere  result  of  chance  and  favourable  circumstance,  as  Senior  put  it. 
Nothing  could  be  easier  than  to  levy  a  land  tax  which  would  gradually 
absorb  rent,  and  which  could  be  periodically  increased  as  rents 
advanced.  The  idea  was  a  brilliant  one,  and  Mill  had  learned  it 
from  his  father.  It  soon  became  the  rallying-cry  of  a  new  school  of 
economists  closely  akin  to  the  socialists. 

The  movement  begot  of  this  idea  of  confiscation  deserves  the 
fuller  treatment  which  will  be  found  in  another  chapter  of  this  work. 

Meanwhile,  and  until  the  larger  and  more  revolutionary  reform 
becomes  practical,  Mill  would  welcome  a  modest  instalment  of 
emancipation  in  the  shape  of  peasant  proprietorship.  Like  the 
co-operative  ideal,  this  also  was  of  French  extraction.  Admiration 
of  the  French  peasant  had  been  a  fashionable  cult  in  England  ever 
since  the  days  of  Arthur  Young.1  Mill  thought  that  among  the 

1  But  Young  remained  a  champion  of  grande  culture,  while  Mill  was  a  com- 
plete convert  to  peasant  proprietorship.  But  peasant  proprietorship  is  proposed 
simply  as  a  step  towards  association. 

"  The  opinion  expressed  in  a  former  part  of  this  treatise  respecting  small 
lauded  properties  and  peasant  proprietors  may  have  made  the  reader  anticipate 
that  a  wide  diffusion  of  property  in  land  is  the  resource  on  which  I  rely 
for  exempting  at  least  the  agricultural  labourers  from  exclusive  dependence  on 
labour  for  hire.  Such,  however,  is  not  my  opinion.  I  indeed  deem  that  form 
of  agricultural  economy  to  be  most  groundlessly  cried  down,  and  to  be  greatly 
preferable  in  its  aggregate  effects  on  human  happiness  to  hired  labour  in  any  form 
in  which  it  exists  at  present.  But  the  aim  of  improvement  should  be  not  solely 
to  place  human  beings  in  a  condition  in  which  they  will  be  able  to  do  without 
one  another,  but  to  enable  them  to  work  with  or  for  one  another  in  relations 
not  involving  dependence."  (Principles,  Book  IV,  chap.  7,  §  4.) 

Mill  was  not  the  only  one  who  looked  to  peasant  proprietorship  partly  to  solve 
the  social  problem.  Not  to  mention  Sismondi,  who  was  very  much  taken  up 
with  the  idea,  we  have  Thornton  in  England  in  his  Plea  for  Peasant  Proprietor* 
(1848)  and  Hippolyte  Passy  in  France  in  his  excellent  little  volume  Des  Systimea 
de  Culture  (1852)  strongly  advocating  it.  The  Classical  economists  for  the 
most  part  took  the  opposite  point  of  view,  especially  Lavergne  in  his  Essai  «ur 
rurale  de  VAngleterre. 


372  DECLINE  OF  THE  CLASSICAL  SCHOOL 

principal  advantages  of  peasant  proprietorship  would  be  a  lessening 
of  the  injustice  of  rent,  because  its  benefits  would  be  more  widely 
distributed.  The  feeling  of  independence  would  check  the  deteriora- 
tion of  the  wage-earner,  individual  initiative  would  be  encouraged, 
the  intelligence  of  the  cultivator  developed,  and  the  growth  of  popu- 
lation checked. 

Mill  inspired  a  regard  for  the  frugal  French  peasantry  in  the 
English  Radical  party.  To  his  influence  are  due  the  various  Small 
Holdings  Acts  which  have  resulted  in  the  establishment  of  small  islets 
of  peasant  tillers  amid  the  vast  territories  of  the  English  aristocracy. 

(3)  Mill  was  equally  shocked  at  our  antiquated  inheritance  law, 
which  permits  people  to  possess  wealth  which  they  have  never  helped 
to  produce.  To  Senior  inheritance  ranked  with  the  inequality  of 
rent,  and  he  placed  both  in  the  same  category.  To  Mill  it  appeared 
to  be  not  merely  antagonistic  to  individual  liberty,  but  a  source  of 
danger  to  free  competition,  because  it  placed  competitors  in  positions 
of  unequal  advantage.  In  this  matter  Mill  was  under  the  influence 
of  the  Saint-Simonians,  and  he  made  no  attempt  to  hide  his  contempt 
for  the  "  accident  of  birth." 

This  right  of  bequest,  he  felt,  was  a  very  difficult  problem,  for 
the  right  of  free  disposal  of  one's  property  even  after  death  con- 
stituted one  of  the  most  glorious  attributes  of  individuality.  It 
implied  a  kind  of  survival  or  persistence  of  the  human  will.  Mill 
showed  considerable  ingenuity  in  extricating  himself  from  this 
difficult  position.  He  would  respect  the  right  of  the  proprietor  to 
dispose  of  his  goods,  but  would  limit  the  right  of  inheritance  by 
making  it  illegal  to  inherit  more  than  a  certain  sum.  The  testator 
would  still  enjoy  the  right  of  bequeathing  his  property  as  he  wished, 
but  no  one  who  already  possessed  a  certain  amount  of  wealth  could 
inherit  it.  Of  all  the  solutions  of  this  problem  that  have  been 
proposed,  Mill's  is  the  most  socialistic.  He  puts  it  forward,  however, 
not  as  a  definite  project,  but  as  a  mere  suggestion.1 

1  "  Were  I  framing  a  code  of  laws  according  to  what  seems  to  me  best  in  itself, 
without  regard  to  existing  opinions  and  sentiments,  I  should  prefer  to  restrict, 
not  what  anyone  might  bequeath,  but  what  anyone  should  be  permitted  to 
acquire  by  bequest  or  inheritance.  Each  person  should  have  power  to  dispose 
by  will  of  his  or  her  whole  property  ;  but  not  to  lavish  it  in  enriching  some  one 
individual  beyond  a  certain  maximum."  (Principles,  Book  II,  chap.  2,  §  4.) 

It  is  hardly  necessary  to  say  that  this  limitation  of  the  right  of  inheritance 
is  a  purely  personal  opinion  of  Mill,  and  that  it  is  rejected  along  with  his  other 
solutions  by  most  individualists.  It  is  not  quite  correct  to  say  then,  as  Schatz 
has  said  in  his  Individualism,  that  Stuart  Mill  is  "  the  very  incarnation  of  the 
individualistic  spirit."  He  was  really  a  somewhat  sceptical  disciple  of  the  school, 
and  his  frequent  change  of  opinion  was  very  embarrassing  ! 


MILL'S  INDIVIDUALIST-SOCIALIST  PROGRAMME    373 

Mill  might  well  have  been  given  a  place  among  the  Pessimists, 
especially  as  he  inherits  their  tendency  to  see  the  darker  side  of 
things.  Not  only  did  the  law  of  population  fill  him  with  terror,  but 
the  law  of  diminishing  returns  seemed  to  him  the  most  important 
proposition  in  the  whole  of  economic  science  ;  and  all  his  works 
abound  with  melancholy  reflections  upon  the  futility  of  progress. 
There  is,  for  instance,  the  frequently  quoted  "It  is  questionable  if 
all  the  mechanical  inventions  yet  made  have  lightened  the  day's 
toil  of  any  human  being."  l  In  his  vision  of  the  future  of  society 
he  prophesies  that  the  river  of  human  life  will  eventually  be  lost  in 
the  sea  of  stagnation. 

It  is  worth  while  dwelling  for  a  moment  on  this  idea  of  a 
stationary  state.  Though  the  conception  is  an  old  one,  it  is  very 
characteristic  of  Mill's  work,  and  he  feels  himself  forced  to  the 
belief  that  only  by  reverting  to  the  stationary  state  can  we  hope  for 
a  solution  of  the  social  question. 

Economists,  especially  Ricardo,  had  insisted  upon  the  tendency 
of  profits  to  a  minimum  as  a  correlative  of  the  law  of  diminishing 
returns.  This  tendency,  it  was  believed,  would  continue  until 
profits  had  wholly  disappeared  and  the  formation  of  new  capital 
was  arrested.2  Mill  took  up  the  theory  where  Ricardo  had  left  it,  and 
arrived  at  the  conclusion  that  industry  would  thus  be  brought  to  a 
standstill,  seeing  that  the  magnitude  of  industry  is  dependent  upon 

1  Principles,  Book  II,  chap.  6,  §  2. 

1  "  There  is  at  every  time  and  place  some  particular  rate  of  profit,  which  is 
the  lowest  that  will  induce  the  people  of  that  country  and  time  to  accumulate 
savings.  .  .  .  But  though  the  minimum  rate  of  profit  is  thus  liable  to  vary,  and 
though  to  specify  exactly  what  it  is  would  at  any  given  time  be  impossible,  such 
a  minimum  always  exists  ;  and  whether  it  be  high  or  low,  when  once  it  is  reached 
no  further  increase  of  capital  can  for  the  present  take  place.  The  country  has 
then  attained  what  is  known  to  political  economists  under  the  name  cf  the 
Stationary  State."  (Ibid.,  Book  IV,  chap.  4,  §  3.) 

Mill  indicates  the  causes  that  contribute  to  a  fall  in  the  rate  of  profits  as 
well  as  the  causes  that  arrest  that  fall,  such  as  the  progress  of  production  and 
the  destruction  of  wealth  by  wars  and  crises. 

It  may  be  worth  while  pointing  out  that  the  word  profit  as  employed  by  the 
English  economists,  and  especially  by  Mill,  has  not  the  same  meaning  as  it  has 
with  the  French  writers.  French  economists  since  the  time  of  Say  have  employed 
the  term  profit  to  denote  the  earnings  of  the  entrepreneur,  the  capitalist's  income 
being  designated  interest.  The  English  economists  do  not  distinguish  between 
the  work  of  the  entrepreneur  and  that  of  the  capitalist,  and  the  term  profit  covers 
them  both.  The  result  is  that  the  French  Hedonistic  economists  can  say  that 
under  a  regime  of  absolutely  free  competition  profit  would  fall  to  zero,  while  the 
English  economists  cannot  accept  their  thesis  because  profits  include  interest, 
which  will  always  remain  as  the  reward  of  waiting. 

The  French  point  of  view  ifl  more  generally  adopted  to-day. 


374  DECLINE  OF  THE  CLASSICAL  SCHOOL 

the  amount  of  available  capital.  Population  must  then  become 
stationary,  and  all  economic  movement  must  cease.  Though 
alarmed  at  the  economic  significance  of  this  prospect,  Mill  acquiesced 
in  its  ethical  import.  On  the  whole  he  thinks  that  such  a  state 
would  be  a  very  considerable  improvement  on  our  present  condition. 
With  economic  activity  brought  to  a  standstill  the  current  of  human 
life  would  simply  change  its  course  and  turn  to  other  fields.1  The 
decay  of  Mammon-worship  and  the  thirst  for  wealth  would  simply 
mean  an  opportunity  for  pursuing  worthier  objects.  He  hoped  that 
the  arrest  of  economic  progress  would  result  in  a  real  moral  advance, 
and  in  the  appeasement  of  human  desires  he  looked  for  a  solution 
and  for  the  final  disappearance  of  the  social  problem.  And  as  far 
as  we  can  see  the  reformers  of  to-day  have  nothing  better  to  offer  us. 

Ill :  MILL'S  SUCCESSORS 

MILL'S  influence  was  universal,  though,  properly  speaking,  he  had  no 
disciples.  This  was,  no  doubt,  partly  because  writers  like  Toynbee, 
who  would  naturally  have  become  disciples,  were  already  enrolled 
in  the  service  of  the  Historical  school. 

The  Classical  school  failed  to  follow  his  socialistic  lead.  It  still 
preached  the  old  doctrines,  but  with  waning  authority,  and  no  new 
work  was  produced  which  is  at  all  comparable  with  the  works  which 
we  have  already  studied.  We  will  mention  a  few  of  the  later  writings, 
however,  for,  though  belonging  to  the  second  class,  they  are  in  some 
respects  excellent. 

In  the  first  place  we  have  several  books  written  by  Cairnes,' 
notably  Some  Leading  Principles  of  Political  Economy  (1874).  Cairnes 
is  generally  regarded  as  a  disciple  of  Mill,  though  as  a  matter  of  fact 
he  was  nothing  of  the  kind.  Cairnes  was  purely  Classic,  and  shared 
the  Classical  preference  for  the  deductive  method,  which  he  thought 
the  only  method  for  political  economy.  His  preference  for  that 
method  sometimes  resulted  in  his  abusing  it,  and  he  was  curiously 
indifferent  to  all  social  iniquities.  He  accepted  laissez-faire,  not  as 
the  basis  of  a  scientific  doctrine,  but  simply  as  a  safe  and  practical 
rule  of  conduct.8  The  old  wage  fund  theory  has  in  him  a  champion 
who  attempted  to  defend  it  against  Stuart  Mill.  It  cannot  be  said 

1  In  a  letter  to  Gustave  d'Eichthal,  recently  published,  speaking  of  August© 
Comte,  he  writes  as  follows :  "  How  ridiculous  to  think  that  this  law  of  civilisation 
requires  as  its  correlative  constant  progress !  Why  not  admit  that  as  humanity 
advances  in  certain  respects  it  degenerates  in  others  ?  " 

1  On  the  question  of  co-operation  as  a  method  of  social  reform,  Cairnes,  who 
eiinply  refers  to  it  as  a  possible  alternative,  may  have  owed  something  to  Mill. 

*  Essay*,  p.  281. 


MILL'S  SUCCESSORS  375 

that  he  made  any  new  contribution  to  the  science,  unless  we  except 
his  teaching  concerning  competition.  He  pointed  out  that  competi- 
tion has  not  the  general  scope  that  is  usually  attributed  to  it.  It 
only  obtains  between  individuals  placed  in  exactly  similar  circum- 
stances. In  other  words,  it  operates  within  small  areas,  and  is 
inoperative  as  between  one  area  and  another.  This  theory  of  non- 
competing  groups  helps  to  throw  some  light  upon  the  persistent 
inequality  shown  by  wages  and  profits. 

In  France  the  most  prominent  representative  of  political 
economy  during  the  Second  Empire  was  Michel  Chevalier,  a  disciple 
of  Saint-Simon.  He  nevertheless  remained  faithful  to  the  Classical 
tradition  of  Say  and  Rossi,1  his  predecessors  at  the  College  de  France. 
He  waged  battle  with  the  socialists  of  1848,  made  war  upon  Protec- 
tion, and  had  the  good  fortune  to  be  victorious  in  both  cases,  sharing 
with  Cobden  the  honour  of  being  a  signatory  to  the  famous  com- 
mercial treaty  of  1860.  He  realised  the  important  place  that  rail- 
ways would  some  day  occupy  in  national  economy,  and  the  great 
possibilities  of  an  engineering  feat  like  the  Suez  Canal.  He  was  also 
alive  to  the  importance  of  credit  institutions,  which  were  only  at  the 
commencement  of  their  useful  career  just  then. 2  Although  con- 
nected with  the  Liberal  school,  he  was  not  indifferent  to  the  teaching 
of  the  Saint-Simonians  on  the  importance  of  the  authority  and 
functions  of  the  State,  and  he  impressed  upon  the  Government  the 
necessity  of  paying  attention  to  labour  questions — a  matter  to  which 
Napoleon  III  was  naturally  somewhat  averse.  Every  subject  which 
he  handles  is  given  scholarly  and  eloquent  treatment. 

About  the  same  time  Courcelle-Seneuil  published  a  treatise  on 
political  economy  which  was  for  a  long  time  regarded  as  a  standard 
work.  Seneuil  was  a  champion  of  pure  science — or  "  plutology," 
as  he  called  it,  in  order  to  distinguish  it  from  applied  science,  to 
which  he  gave  the  name  "  ergonomy."  For  a  long  time  he  was 
regarded  as  a  kind  of  pontiff,  and  the  pages  of  the  Journal  des  ficono- 
mistes  bear  evidence  of  the  chastisement  which  he  bestowed  upon 
any  of  the  younger  writers  who  tried  to  shake  off  his  authority. 
This  was  the  time  when  Maurice  Block  was  meting  out  the  same 
treatment  to  the  new  German  school  in  those  bitterly  critical  articles 
which  appeared  in  the  same  journal. 

1  Since  1830  there  have  only  been  four  professors. — J.  B.  Say,  Rossi,  Michel 
Chevalier, and  Chevalier's  son-in-law,  M.  Paul  Leroy-Beaulieu.  The  history  of  the 
chair  is  a  fair  summary  of  the  history  of  French  economics. 

3  His  most  curious  book,  perhaps,  was  De  la  Baisse  probable  de  VOr,  a  title 
that  caused  a  good  deal  of  amusement  during  the  latter  half  of  the  nineteenth 
century,  but  which  proved  somewhat  of  a  prophecy  after  all. 


376          DECLINE  OF  THE  CLASSICAL  SCHOOL 

It  is  to  be  regretted  that  we  cannot  credit  France  with  the  Precis 
de  la  Science  economique  et  de  ses  Principales  Applications,  which 
appeared  in  1862.  Cherbuliez,  the  author,  was  a  Swiss,  and  was 
professor  first  at  Geneva  and  then  at  Zurich.  Cossa,  in  his  Histoire, 
speaks  of  it  as  "  undoubtedly  the  best  treatise  on  the  subject  published 
in  France,"  and  as  being  "  possibly  superior  even  to  Stuart  Mill's." 
Cherbuliez  belonged  to  the  Classical  school.  He  was  opposed  to 
socialism,  and  wrote  pamphlets  a  la  Bastiat  in  support  of  Liberal 
doctrines  and  the  deductive  method.  But,  like  the  Mills  before  him, 
and  Walras,  Spencer,  Laveleye,  Henry  George,  and  many  others 
who  came  after,  he  found  it  hard  to  reconcile  private  property  with 
the  individualistic  doctrine,  "  To  each  the  product  of  his  labour." 
He  reconciles  himself  to  this  position  merely  because  he  thinks  that 
it  is  possibly  a  lesser  evil  than  collective  property. 

The  Liberal  school  had  still  a  few  adherents  in  Germany,  although 
a  serious  rival  was  soon  to  make  its  appearance.  Prince  Smith  (of 
English  extraction)  undertook  the  defence  of  Free  Trade,  pointing  out 
"  the  absurdity  of  regarding  it  as  a  social  question,"  and  "  how  much 
more  absurd  it  is  to  think  that  it  can  ever  be  solved  other  than  by 
the  logic  of  facts."  Less  a  doctrinaire  than  a  reformer,  Schulze- 
Delitzsch,  about  1850,  inaugurated  that  movement  which,  notwith- 
standing the  gibes  of  Lassalle,  has  made  magnificent  progress,  and 
to-day  includes  thousands  of  credit  societies ;  though  up  to  the 
present  it  has  not  benefited  anyone  beyond  the  lower  middle  classes 
— the  small  shopkeeper,  the  well-to-do  artisan,  and  the  peasant 
proprietor. 


BOOK  IY:  THE  DISSENTERS 

WITH  Bastiat  economic  Liberalism,  threatened  by  socialism,  sought 
precarious  refuge  in  Optimism.  With  Mill  the  older  doctrines  found 
new  expression  in  language  scientific  in  its  precision  and  classical 
in  its  beauty. 

It  really  seemed  as  if  political  economy  had  reached  its  final 
stage  and  that  there  could  be  no  further  excuse  for  prolonging  our 
survey. 

But  just  when  Liberalism  seemed  most  triumphant  and  the 
principles  of  the  science  appeared  definitely  settled  there  sprang  up 
a  feeling  of  general  dissatisfaction.  Criticism,  which  had  suffered 
a  temporary  check  after  1848,  now  reasserted  its  claims,  and  with  a 
determination  not  to  tolerate  any  further  interruption  of  its  task. 

The  reaction  showed  itself  most  prominently  in  Germany,  where 
the  new  Historical  school  refused  to  recognise  the  boundaries  of  the 
science  as  laid  down  by  the  English  and  French  economists.  The 
atmosphere  of  abstractions  and  generalisations  to  which  they  had 
confined  it  was  altogether  too  stifling.  It  demanded  new  contact 
with  life — with  the  life  of  the  past  no  less  than  that  of  the  present. 
It  was  weary  of  the  empty  framework  of  general  terms.  It  was 
athirst  for  facts  and  the  exercise  of  the  powers  of  observation.  With 
all  the  ardour  of  youth  it  was  prepared  to  challenge  all  the  tradi- 
tional conclusions  and  to  reformulate  the  science  from  its  very  base. 

So  much  for  the  doctrine.  But  there  was  one  thing  which  was 
thought  more  objectionable  than  even  the  Classical  doctrine  itself, 
and  that  was  the  Liberal  policy  with  which  the  science  had  foolishly 
become  implicated,  and  which  must  certainly  be  removed. 

In  addition  to  such  critics  as  the  above  there  are  also  the  writers 
who  drew  their  inspiration  from  Christianity,  and  in  the  name  of 
charity,  of  morality,  or  of  religion  itself,  uttered  their  protest  against 
optimism  and  laissez-faire.  Intervention  again,  so  tentatively  pro- 
posed by  Sismondi,  makes  a  bold  demand  for  wider  scope  in  view 
of  the  pressure  of  social  problems,  and  under  the  name  of  State 
Socialism  becomes  a  definitely  formulated  doctrine. 

Socialism,  which  Reybaud  believed  dead  after  1848,  revived  in 

its  turn.     Marx's  Kapital,  published  in  1867,  is  the  completest  and 

most  powerful  exposition  of  socialism  that  we  have.      It  is  no 

longer  a  pious  aspiration,  but  a  new  and  a  scientific  doctrine  ready 

«.D.  377  M 


378  THE  DISSENTERS 

to  do  battle  with  the  champions  of  the  Classical  school,  and  to  con- 
fute them  out  of  their  own  mouths. 

None  of  these  currents  is  entirely  new.  Book  II  has  shown  us 
where  they  originated,  and  their  beginnings  can  be  traced  to  the 
earlier  critical  writers. 

But  we  must  not  forget  the  striking  difference  between  the  ill-fated 
doctrines  of  the  pre-1848  period  and  the  striking  success  achieved 
by  the  present  school.  Despite  the  sympathy  shown  for  the  earlier 
critics,  they  remained  on  the  whole  somewhat  isolated  figures.  Their 
protests  were  always  individualistic — Sismondi's  no  less  than  Saint- 
Simon's,  Fourier's  no  less  than  Owen's.  Proudhon  and  List  never 
seriously  shook  the  public  confidence  in  Liberalism.  Now,  on  the  con- 
trary, Liberalism  finds  itself  deserted,  and  sees  the  attention  of  public 
opinion  turning  more  and  more  in  the  direction  of  the  new  school. 

The  triumph,  of  course,  was  not  immediate.  Many  of  the  doc- 
trines were  formulated  between  1850  and  1875,  but  victory  was  de- 
ferred until  the  last  quarter  of  the  century.  But  when  it  did  come  it 
was  decisive.  In  Germany  history  monopolised  the  functions  of  eco- 
nomics, at  least  for  a  time.  Intervention  has  only  become  universal 
since  1880.  Since  then,  also,  collectivism  has  won  over  the  majority 
of  the  workers  in  all  industrial  countries,  and  has  exercised  very 
considerable  influence  upon  politics,  while  Christian  Socialism  has 
discovered  a  way  of  combining  all  its  most  fervent  adherents,  of 
whatever  persuasion,  in  one  common  faith. 

The  advance  of  this  new  school  meant  the  decline  of  the  Classical 
doctrine  and  the  waning  of  Liberalism.  Public  interest  gravitated 
away  from  the  teaching  of  the  founders.  But  in  the  absence  of  a  new 
and  a  definite  creed,  what  we  find  is  a  kind  of  general  dispersion  of 
economic  thought,  accompanied  by  a  feeling  of  doubt  as  to  the 
validity  of  theory  in  general  and  of  theoretical  political  economy  in 
particular.  The  old  feeling  of  security  gave  place  to  uncertainty. 
Instead  of  the  comparative  unanimity  of  the  early  days  we  have  a 
complete  diversity  of  opinions,  amid  which  the  science  sets  out  on  a 
new  career. 

In  the  last  Book  we  shall  find  that  certain  eminent  writers  have 
succeeded  in  renewing  the  scientific  tradition  of  the  founders.  But 
every  connection  with  practical  politics  had  to  be  removed  and  a 
new  body  of  closely  knit  doctrines  had  to  be  created  before  social 
thinkers  could  have  this  new  point  of  view  from  which  to  co-operate. 


THE  HISTORICAL  SCHOOL  379 


CHAPTER  I:  THE  HISTORICAL  SCHOOL  AND 
THE  CONFLICT  OF  METHODS 

THE  second  half  of  the  nineteenth  century  is  dominated  by  Historical 
ideas,  though  their  final  triumph  was  not  fully  established  until 
the  last  quarter  of  the  century.  The  rise  of  these  ideas,  however, 
belongs  to  a  still  earlier  period,  and  dates  from  1843,  when  there 
appeared  a  small  volume  by  Roscher  entitled  Grundriss.  We  shall 
have  to  return  to  that  date  if  we  wish  to  understand  the  ideas  of  the 
school  and  to  appreciate  their  criticisms. 

The  successors  of  J.  B.  Say  and  Ricardo  gave  a  new  fillip  to  the 
abstract  tendency  of  the  science  by  reducing  its  tenets  to  a  small 
number  of  theoretical  propositions.  The  problems  of  international 
exchange,  of  the  rate  of  profits,  wages,  and  rent,  were  treated  simply 
as  a  number  of  such  propositions,  expressed  with  almost  mathematical 
precision.  Admitting  their  exactness,  we  must  also  recognise  that 
they  are  far  from  being  adequate,  and  could  not  possibly  afford  an 
explanation  of  the  different  varieties  of  economic  phenomena  or  help 
the  solution  of  the  many  practical  problems  which  the  development 
of  industry  presents  to  the  statesman.  But  McCulloch,  Senior, 
Storch,  Rau,  Gamier,1  and  Rossi,  the  immediate  successors  of 
Ricardo  and  Say  in  England  and  France,  repeated  the  old  formulae 
without  making  any  important  additions  to  them.  The  new 
system  of  political  economy  thus  consisted  of  a  small  number  of 
quite  obvious  truths,  having  only  the  remotest  connection  with 
economic  life.  It  is  true  that  Mill  is  an  exception.  But  the  Principles 
dates  from  1848,  which  is  subsequent  to  the  foundation  of  the 
Historical  school.  With  this  exception  we  may  say,  in  the  words  of 
Schmoller,  that  after  the  days  of  Adam  Smith  political  economy 
seems  to  have  suffered  from  an  attack  of  anaemia.8 

Toynbee  gives  admirable  expression  to  this  belief  in  his  article 
on  Ricardo  and  the  Old  Political  Economy :  8  "  A  logical  artifice 
became  the  accepted  picture  of  the  real  world.  Not  that  Ricardo 
himself,  a  benevolent  and  kind-hearted  man,  could  have  wished 

1  Joseph  Gamier,  who  must  not  be  confused  with  Germain  Garnier,  the 
translator  of  Smith's  works,  published  the  first  edition  of  his  Elements  d'ficonomie 
politique  in  1845.  From  1848  up  to  his  death  in  1881  he  was  chief  editor  of  the 
Journal  des  Economistes. 

1  G.  Schmoller,  Zur  Litteraturgeschichte  der  Stoats-  und  Sozialioissenschafien 
(Leipzig,  1888).  The  expression  will  be  found  in  his  study  of  Roscher. 

»  A.  Toyubee,  The  Industrial  Revolution. 


380  THE  HISTORICAL  SCHOOL 

or  supposed,  had  he  asked  himself  the  question,  that  the  world 
of  his  treatise  actually  was  the  world  he  lived  in ;  but  he  uncon- 
sciously fell  into  the  habit  of  regarding  laws  which  were  those 
only  of  that  society  which  he  had  created  in  his  study  for  pur- 
poses of  analysis  as  applicable  to  the  complex  society  really 
existing  around  him.  And  the  confusion  was  aggravated  by  some 
of  his  followers  and  intensified  in  ignorant  popular  versions  of 
his  doctrines."  In  other  words,  there  was  a  striking  divergence 
between  economic  theory  and  concrete  economic  reality,  a  diver- 
gence that  was  becoming  wider  every  day,  as  new  problems  arose 
and  new  classes  were  being  formed.  But  the  extent  of  the  gap  was 
best  realised  when  an  attempt  was  made  to  apply  the  principles  of 
the  science  to  countries  where  the  economic  conditions  were  entirely 
different  from  those  existing  either  in  England  or  in  France. 

This  divergence  between  theory  and  reality  might  conceivably 
be  narrowed  in  one  of  two  ways.  A  more  harmonious  and  a  more 
comprehensive  theory  might  be  formulated,  a  task  which  Menger, 
Jevons,  and  Walras  attempted  about  1870.  A  still  more  radical 
suggestion  was  to  get  rid  of  all  abstract  theory  altogether  and  to 
confine  the  science  to  a  simple  description  of  economic  phenomena. 
This  was  the  method  of  procedure  that  was  attempted  first,  and  it  is 
the  one  followed  by  the  Historical  school. 

Long  before  this  time  certain  writers  had  pointed  out  the  dangers 
of  a  too  rigid  adherence  to  abstraction.  Sismondi — an  essentially 
historical  writer — treated  political  economy  as  a  branch  of  moral 
science  whose  separation  from  the  main  trunk  is  only  partial,  and 
insisted  upon  studying  economic  phenomena  in  connection  with  their 
proper  environment.  He  criticised  the  general  conclusions  of 
Ricardo  and  pleaded  for  a  closer  observation  of  facts.1  List  showed 
himself  a  still  more  violent  critic,  and,  not  content  with  the  con- 
demnation of  Ricardian  economics,  he  ventured  to  extend  his  stric- 
tures even  to  Smith.  Taking  nationality  for  the  basis  of  his  system, 
he  applied  the  comparative  method,  upon  which  the  Historical 
school  has  so  often  insisted,2  to  the  commercial  policy  of  the  Classical 

1  It  is  curious  that  the  Historians  never  refer  to  Sismondi  as  one  of  the 
pioneers  of  historical  study.  Roscher  and  Hildebrand  never  mention  him  at 
all,  and  Knies  only  thinks  of  him  as  a  socialist  (of.  Die  Nationaldkonomie  vom 
historischen  Standpunkt,  2nd  ed.,  p.  322). 

1  Even  List  did  not  escape  criticism  at  their  hands.  Hildebrand  thinks  that 
he  was  infected  with  the  atomic  views  of  Adam  Smith  and  never  showed  himself 
sufficiently  conscious  of  the  ethical  nature  of  society.  "  List  seems  to  think  that 
the  entire  subordination  of  private  interest  to  public  utility  is  dictated  by  custom, 
and  even  by  private  interest  when  properly  understood,  but  he  never  regards 


ORIGIN  AND  DEVELOPMENT  381 

school ;  but  history  was  still  employed  merely  for  the  purpose  of 
illustration.  Finally,  socialists,  especially  the  Saint-Simonians,  whose 
entire  system  is  simply  one  vast  philosophy  of  history,  had  shown 
the  impossibility  of  isolating  economic  from  political  and  juridical 
phenomena,  with  which  they  are  always  intermingled. 

But  no  author  as  yet  had  deliberately  sought  either  in  history  or 
in  the  observation  of  contemporary  facts  a  means  of  reconstructing 
the  science  as  a  whole.  It  is  just  here  that  the  originality  of  the 
German  school  lies. 

Its  work  is  at  once  critical  and  constructive.  On  the  critical  side 
we  have  a  profound  and  suggestive,  though  not  always  a  just,  analysis 
of  the  principles  and  methods  of  the  older  economists,  while  its 
constructive  efforts  gave  new  scope  to  the  science,  extended  the 
range  of  its  observations,  and  added  to  the  complexity  of  its  problems. 

Generally  speaking,  it  is  not  a  difficult  task  to  give  an  exposition 
of  the  critical  ideas  of  the  school,  as  we  find  them  set  forth  in  several 
books  and  articles,  but  it  is  by  no  means  easy  to  delineate  the  con- 
ceptions underlying  the  positive  work.  Though  implicit  in  all  their 
writings,  these  conceptions  are  nowhere  explicitly  stated  ;  whenever 
they  have  tried  to  define  them  it  has  always  been,  as  their  disciples 
willingly  admit,  in  a  vague  and  contradictory  fashion. x  To  add  further 
to  the  difficulty,  each  author  defines  them  after  his  own  fashion,  but 
claims  that  his  definition  represents  the  ideas  of  the  whole  school. 

In  order  to  avoid  useless  repetitions  and  discussions  without 
number  we  shall  begin  with  a  rapid  survey  of  the  outward  develop- 
ment of  the  school,  following  with  a  rtsumi  of  its  critical  work, 
attempting,  finally,  to  seize  hold  of  its  conception  of  the  nature  and 
object  of  political  economy.  From  our  point  of  view  the  last-named 
object  is  by  far  the  most  interesting. 


I :   THE  ORIGIN  AND  DEVELOPMENT 
OF  THE  HISTORICAL  SCHOOL 

THE  honour  of  founding  the  school  undoubtedly  belongs  to 
Wilhelm  Roscher,  a  Gottingen  professor,  who  published  a  book 
entitled  Grundriss  zu  Vorlesungen  uber  die  Staatswirtschaft  nach 
geschichllicher  Methods  in  1843.  In  the  preface  to  that  small  volume 

it  as  a  public  duty  rising  out  of  the  very  nature  of  society  itself."  (Hildebrand, 
Die  Nationalokonomie  der  Oegenwart  und  Zukunft,  p.  73.)  Note  the  ethical 
Btandpoint  of  the  school. 

1  See,  among  others,  Max  Weber's  articles  hi  Schmoller's  Jahrbuch  for  1903, 
p.  1881,  and  1905,  p.  1323.  The  methodological  errors  of  Roscher,  Knies,  and 
Hildebrand  get  their  due  meed  of  criticism. 


382  THE  HISTORICAL  SCHOOL 

he  mentions  some  of  the  leading  ideas  which  inspired  him  to  under- 
take the  work,  which  reached  fruition  in  the  celebrated  System  der 
VolJcswirtschaft  (1st  ed.,  1854).  He  makes  no  pretence  to  any- 
thing beyond  a  study  of  economic  history.  "  Our  aim,"  says  he, 
"  is  simply  to  describe  what  people  have  wished  for  and  felt  in 
matters  economic,  to  describe  the  aims  they  have  followed  and  the 
successes  they  achieved — as  well  as  to  give  the  reasons  why  such 
aims  were  chosen  and  such  triumphs  won.  Such  research  can  only 
be  accomplished  if  we  keep  in  close  touch  with  the  other  sciences  of 
national  life,  with  legal  and  political  history,  as  well  as  with  the 
history  of  civilisation."  l  Almost  in  the  same  breath  he  justifies  an 
attack  upon  the  Ricardian  school.  He  recognises  that  he  is  far 
from  thinking  that  his  is  the  only  or  even  the  quickest  way  of  attain- 
ing the  truth,  but  thinks  that  it  will  lead  into  pleasant  and  fruitful 
quests,  which  once  undertaken  will  never  be  abandoned. 

What  Roscher  proposed  to  do  was  to  try  to  complete  the 
current  theory  by  adding  a  study  of  contemporary  facts  and  opinions, 
and,  as  a  matter  of  fact,  in  the  series  of  volumes  which  constitute 
the  System,  every  instalment  of  which  was  received  with  growing 
appreciation  by  the  German  world  of  letters,  Roscher  was  merely 
content  to  punctuate  his  exposition  of  the  Classical  doctrines  with 
many  an  erudite  excursus  in  the  domain  of  economic  facts  and  ideas.' 

Roscher  referred  to  his  experiment  as  an  attempt  to  apply  the 
historical  method  which  Savigny  had  been  instrumental  in  intro- 
ducing with  such  fruitful  results  into  the  study  of  jurisprudence.8 
But,  as  Karl  Menger  *  has  well  pointed  out,  the  similarity  is  only 
superficial.  Savigny  employed  history  in  the  hope  of  obtaining 
some  light  upon  the  organic  nature  and  the  spontaneous  origin  of 
existing  institutions.  His  avowed  object  was  to  prove  their  legiti- 
macy despite  the  radical  pretensions  of  the  Rationalist  reformers  of 
the  eighteenth  century.  Roscher  had  no  such  aim  in  view.  He 
was  himself  a  Liberal,  and  fully  shared  in  their  reforming  zeal. 
History  with  him  served  merely  to  illustrate  theory,  to  supply 
rules  for  the  guidance  of  the  statesman  or  to  foster  the  growth  of 
what  he  called  the  political  sense. 

Schmoller  thinks  that  Roscher's  work  might  justly  be  regarded 

1  Grundriss,  preface. 

"  Knies  is  of  the  same  opinion.  He  remarks  that  Roscher's  work  simply 
means  "  a  completion  of  historiography  rather  than  a  correction  of  political 
economy."  (Die  Nationalokonomie  vom  geschichtlichen  Standpunkte,  p.  35.) 

8  Grundriss,  preface,  pp.  iv-v. 

*  Untersuchungcn  uber  die  Methods,  der  Sozialwissenscliaften  und  der  Politischen 
Oekonomie  insbesondere.  (Leipzig,  1883.) 


383 

as  an  attempt  to  connect  the  teaching  of  political  economy  with 
the  "  Cameralist "  tradition  of  seventeenth-  and  eighteenth-century 
Germany.1  These  Cameralists  were  engaged  in  teaching  the  principles 
of  administration  and  finance  to  students  who  were  to  spend  their 
lives  in  administrative  work  of  one  kind  or  another,  and  they  naturally 
took  good  care  to  keep  as  near  actual  facts  as  possible.  Even  in 
England  and  France  political  economy  soon  got  involved  in  certain 
practical  problems  concerning  taxation  and  commercial  legislation. 
But  in  a  country  like  Germany,  which  was  industrially  much  more 
backward  than  either  England  or  France,  these  problems  wore  a 
very  different  aspect,  and  some  correction  of  the  Classical  doctrines 
was  absolutely  necessary  if  they  were  to  bear  any  relation  to  the 
realities  of  economic  life.  Roscher's  innovation  was  the  outcome 
of  a  pedagogic  rather  than  of  a  purely  scientific  demand,  and  he  was 
instrumental  in  reviving  a  university  tradition  rather  than  in  creating 
a  new  scientific  movement. 

In  1848  another  German  professor,  Bruno  Hildebrand,  put 
forward  a  much  more  ambitious  programme,  and  his  Lie  National- 
okonomie  der  Gegenwart  und  ZuJeunft  shows  a  much  more  fundamental 
opposition  to  the  Classical  school.  History,  he  thought,  would  not 
merely  vitalise  and  perfect  the  science,  but  might  even  help  to  re- 
create it  altogether.  Hildebrand  points  to  the  success  of  the  method 
when  applied  to  the  science  of  language.  Henceforth  economics  was 
to  become  the  science  of  national  development.2 

In  the  prospectus  of  the  Jahrbiicher  fur  Nationalokonomie  und 
Statistik,  founded  by  him  in  1863,  Hildebrand  goes  a  step  farther. 
He  challenges  the  teaching  of  the  Classical  economists,  especially  on 
the  question  of  national  economic  laws,  and  he  even  blames  Roscher 
because  he  had  ventured  to  recognise  their  existence.8  He  did  not 
seem  to  realise  that  a  denial  of  that  kind  involved  the  undoing  of  all 

1  Schmoller,  loc.  cit.  For  further  information  concerning  the  Cameraliste 
Bee  Geschichte  der  Nationalokonomie,  by  M.  Oncken.  Menger  and  Schmoller 
also  connect  Roscher  with  Heeren,  Gervinus,  and  the  other  historians  of  Gottin- 
gen  who  during  the  first  quarter  of  the  nineteenth  century  tried  to  found  a  science 
of  politics  upon  a  general  study  of  history.  Roscher  had  studied  history  under 
them,  and  his  aim  is  in  every  respect  similar  to  theirs. 

1  In  the  introduction,  p.  v,  he  declares  that  the  object  of  his  work  is  "  to 
open  a  way  for  an  essentially  historical  standpoint  in  political  economy  and  to 
transform  the  science  of  political  economy  into  a  body  of  doctrines  dealing  with 
the  economic  development  of  nations." 

8  Even  Roscher  had  ventured  to  say  that  they  partook  of  a  mathematical 
nature.  This  is  how  he  expresses  his  views  as  against  those  of  Hildebrand  on 
the  real  aim  of  political  economy  in  the  Jahrbiicher  fur  Nationaltikonomie  und 
Statietik,  vol.  i,  p.  145 :  "  Economic  science  need  not  attempt  to  find  the 


384  THE  HISTORICAL  SCHOOL 

economic  science  and  the  complete  overthrow  of  those  "  laws  of 
development  "  which  he  believed  were  henceforth  to  be  the  basis  of 
the  science. 

But  Hildebrand's  absolutism  had  no  more  influence  than 
Roscher's  eclecticism,  unless  we  make  an  exception  of  his  generalisa- 
tion concerning  the  three  phases  of  economic  development,  which 
he  differentiates  as  follows  :  the  period  of  natural  economy,  that  of 
money  economy,  and  finally  that  of  credit.  Beyond  that  he  merely 
contented  himself  with  publishing  a  number  of  fragmentary  studies 
on  special  questions  of  statistics  or  history,  without,  for  the  most 
part,  making  any  attempt  to  modify  the  Classical  theory  of  produc- 
tion and  distribution. 

The  critical  study  of  1848  hinted  at  a  sequel  which  was  to  embody 
the  principles  of  the  new  method.  But  the  sequel  never  appeared, 
and  the  difficult  task  of  carrying  the  subject  farther  was  entrusted 
to  Karl  Knies,  another  professor,  who  in  1853  published  a  bulky 
treatise  bearing  the  title  of  Political  Economy  from  the  Historical 
Point  of  View.1  But  there  is  as  much  divergence  between  his 
views  and  those  of  his  predecessors  as  there  is  between  Roscher's 
and  Hildebrand's.  He  not  only  questions  the  existence  of  natural 
laws,  but  even  doubts  whether  there  are  any  laws  of  development 
at  all — a  point  Hildebrand  never  had  any  doubts  about — and  thinks 
that  all  we  can  say  is  that  there  are  certain  analogies  presented  by 
the  development  of  different  countries.  Knies  cannot  share  in  the 
belief  of  either  Hildebrand  or  Roscher,  nor  does  he  hold  with  the 
Classical  school.  He  thinks  that  political  economy  is  simply  a 
history  of  ideas  concerning  the  economic  development  of  a  nation  at 
different  periods  of  its  growth. 

Knies's  work  passed  almost  unnoticed,  ignored  by  historians  and 
economists  alike,  until  the  younger  Historical  school  called  attention 
to  his  book,  of  which  a  new  edition  appeared  in  1883.  Knies  makes 
frequent  complaints  of  Roscher's  neglect  to  consider  his  ideas. 

Such  heroic  professions  naturally  lead  us  to  expect  that  Knies 
would  spare  no  effort  to  show  the  superiority  of  the  new  method. 

unchangeable,  identical  laws  amid  the  multiplicity  of  economic  phenomena. 
Its  task  is  to  show  how  humanity  has  progressed  despite  all  the  transformations 
of  economic  life,  and  how  this  economic  life  has  contributed  to  the  perfection  of 
mankind.  Its  task  is  to  follow  the  economic  evolution  of  nations  as  well  as  of 
humanity  as  a  whole,  and  to  discover  the  bases  of  the  present  economic  civilisa- 
tion as  well  as  of  the  problems  that  now  await  solution." 

1  The  exact  title  of  the  first  edition  was  Die  Politische  Oekonomie  vom  Stand- 
•punkte  der  geschichtlichen  Methode.  A  second  edition  appeared  in  1883  with  a 
slightly  different  title.  Our  quotations  are  taken  from  the  second  edition. 


ORIGIN  AND  DEVELOPMENT  385 

But  his  subsequent  works  dealing  with  money  and  credit,  upon  which 
his  real  reputation  rests,  bear  scarcely  a  trace  of  the  Historical  spirit. 

The  three  founders  of  the  science  devoted  a  great  deal  of  time 
to  a  criticism  of  the  Classical  method,  but  failed  to  agree  as  to  the 
aim  and  scope  of  the  science  and  left  to  others  the  task  of  applying 
their  principles. 

This  task  was  attempted  by  the  newer  Historical  school,  which 
sprang  up  around  Schmoller  towards  the  end  of  1870.  This  new 
school  possesses  two  distinctive  characteristics. 

(1)  The  useless  controversy  concerning  economic  laws  which 
Hildebrand  and  Knies  had  raised  is  abandoned.  The  members  of  the 
school  are  careful  not  to  deny  the  existence  of  natural  social  laws  or 
uniformities,  and  they  considered  that  the  search  for  these  was  the 
chief  object  of  the  science.  In  reality  they  are  economic  deter- 
minists.  "  We  know  now,"  says  Schmoller,1  "  that  psychical  causa- 
tion is  something  other  than  mechanical,  but  it  bears  the  same 
stamp  of  necessity."  What  they  do  deny  is  that  these  laws  are 
discoverable  by  Classical  methods,  and  on  this  point  they  agree  with 
every  criticism  made  by  their  predecessors. 

As  to  the  possibility  of  formulating  "  the  laws  of  development " 
upon  which  Hildebrand  laid  such  stress,  they  professed  themselves 
very  sceptical.  "  We  have  no  knowledge  of  the  laws  of  history, 
although  we  sometimes  speak  of  economic  and  statistical  laws,"  * 
writes  Schmoller.  "  We  cannot,"  he  regretfully  says  later,  "  even 
say  whether  the  economic  life  of  humanity  possesses  any  element 
of  unity  or  shows  any  traces  of  uniform  development,  or  whether 
it  is  making  for  progress  at  all."  8  This  very  characteristic  passage 
from  Schmoller  was  written  in  1904, 4  and  forms  the  conclusion 

1  Schmoller,  Grundrisa  der  Volkswirtachaftslehre,  vol.  i,  p.  107  (1904). 

•  Ibid.,  vol.  i,  p.  108.  »  Ibid.,  vol.  ii,  p.  653. 

*  All  historians,  however,  are  not  equally  sceptical.    Ashley  in  his  preface  to 
English  Economic  History  and  Theory  writes  as  follows :  "  Just  as  the  history  of 
society,  in  spite  of  apparent  retrogressions,  reveals  an  orderly  development, 
so  there  has  been  an  orderly  development  in  the  history  of  what  men  have 
thought,  and  therefore  in  what  they  have  thought  concerning  the  economic 
side  of  life."    And  Ingram,  in  his  History  of  Political  Economy,  points  out 
that  "  As  we  have  more  than  once  indicated,  an  essential  part  of  the  idea  of 
life  is  that  of  development — in  other  words,  of  ordered  change.     And  that 
such  a  development  takes  place  in  the  constitution  and  working  of  society  in 
all   its  elements  is  a  fact  which  cannot  be  doubted.  .  .  .  That   there  exist 
between  the  several  social  elements  such  relations  as  rcako  the  change  of  one 
element  involve  or  determine  the  change  of  another  is  equally  plain ;  and  why 
the  name  of  natural  laws  should  be  denied  to  such  constant  relations  of  co- 
existence and  succession  it  is  not  easy  to  see.    These  laws  being  universal  admit 
of  the  construction  of  an  abstract  theory  of  economic  development."    (P.  206.) 


386  THE  HISTORICAL  SCHOOL 

of  the  great  synthetic  treatise.  All  attempts  at  a  philosophy  of 
history  are  treated  with  the  same  disdain.1 

(2)  The  newer  Historical  school,  not  content  merely  with  advo- 
cating the  use  of  the  'Historical  method,  hastened  to  put  theory 
into  practice.  Since  about  1860  German  economists  have  shown  a 
disposition  to  turn  away  from  economic  theory  and  to  devote  their 
entire  energy  to  practical  problems,  sociological  studies  and  historical 
or  realistic  research.  The  number  of  economic  monographs  has 
increased  enormously.  The  institutions  of  the  Middle  Ages  and  of 
antiquity,  the  economic  doctrines  of  the  ancients,  statistics,  the 
economic  organisation  of  the  present  day,  these  are  some  of  the  topics 
discussed.  Political  economy  is  lost  in  the  maze  of  realistic  studies, 
whether  of  the  present  day  or  of  the  past. 

Although  the  Historical  school  has  done  an  enormous  amount  of 
work  we  must  not  forget  that  historical  monographs  were  printed 
before  their  time,  and  that  certain  socialistic  treatises,  such  as 
Marx's  Kapital,  are  really  attempts  at  historical  synthesis.  The 
special  merit  of  the  school  consists  in  the  impulse  it  gave  to  systematic 
study  of  this  description.  The  result  has  been  a  renewed  interest 
in  history  and  in  the  development  of  economic  institutions.  We 
cannot  attempt  an  account  of  all  these  works  and  their  varied 
contents.  We  must  remain  satisfied  if  we  can  catch  the  spirit  of 
the  movement.  The  names  of  Schmoller,  Brentano,  Held,  Biicher, 
and  Sombart  are  known  to  every  student  of  economic  history. 
Marshall,  the  greatest  of  modern  theorists,  has  on  more  than  one 
occasion  paid  them  a  glowing  tribute.2 

The  movement  soon  left  Germany,  and  it  was  speedily  realised 
that  conditions  abroad  were  equally  favourable  for  its  work. 

By  the  end  of  1870  practical  Liberalism  had  spent  its  force.  But 
new  problems  were  coming  to  the  front,  especially  the  labour  ques- 
tion, which  demanded  immediate  attention.3  Classical  economists 

A  Schmoller  thinks  that  the  science  in  the  present  stage  of  development, 
while  it  cannot  be  prevented  from  attempting  a  philosophy  of  history,  is  much 
better  employed  in  building  up  simple  scientific  hypotheses  with  a  view  to 
gauging  the  future  course  of  development  than  in  getting  hold  of  "  absolute 
truths." 

1  Marshall,  Principles,  Appendix  A. 

3  Its  influence  has  been  noted  by  Toynbee  in  his  article  on  Ricardo  and 
the  Old  Political  Economy.  "  It  was  the  labour  question,  unsolved  by  that 
removal  of  restrictions  which  was  all  deductive  political  economy  had  to  offer, 
that  revived  the  method  of  observation.  Political  economy  was  transformed 
by  the  working  classes."  Elsewhere  he  adds :  "  The  Historical  method  is  often 
deemed  conservative,  because  it  traces  the  gradual  and  stately  growth  of  our 
venerable  institutions ;  but  it  may  exercise  a  precisely  opposite  influence  by 


ORIGIN  AND  DEVELOPMENT  887 

had  no  solution  to  offer,  and  the  new  study  of  economic  institutions, 
of  social  organisation,  and  of  the  life  of  the  masses  seemed  to  be  the 
only  hopeful  method  of  gaining  light  upon  the  question.  Com- 
parison with  the  past  was  expected  to  lead  to  a  better  understanding 
of  the  present.  The  Historical  method  seemed  to  social  reformers 
to  be  the  one  instrument  of  progress,  and  a  strong  desire  for  some 
practical  result  fostered  belief  in  it.  When  we  remember  the 
prestige  which  German  science  has  enjoyed  since  1871,  and  the  success 
of  the  Germans  in  combining  historical  research  with  the  advocacy 
of  State  Socialism,  we  can  understand  the  enthusiasm  with  which 
the  method  was  greeted  abroad. 

Even  in  England,  the  stronghold  of  Bicardian  economics,  the 
influence  of  the  school  becomes  quite  plain  after  1870. 

Here,  as  elsewhere,  a  controversy  as  to  the  method  employed 
manifests  itself.  Cairnes  in  his  work  The  Character  and  Logical 
Method  of  Political  Economy  (1875  x),  writing  quite  in  the  spirit  of  the 
old  Classical  authors,  strongly  advocates  the  employment  of  the 
deductive  method.  In  1879  Cliff e  Leslie,  in  his  Essays  on  Political 
and  Moral  Philosophy,  enters  the  lists  against  Cairnes  and  makes  use 
of  the  new  weapons  to  drive  home  his  arguments.  The  use  of 
induction  rather  than  deduction,  the  constant  necessity  for  keeping 
economics  in  living  touch  with  other  social  sciences,  the  relative 
character  of  economic  laws,  and  the  employment  of  history  as  a 
means  of  interpreting  economic  phenomena,  are  among  the  argu- 
ments adopted  and  developed  by  Leslie.  Toynbee,  in  his  Lectures 
on  the  Industrial  Revolution,  gave  utterance  to  similar  views,  but 
showed  much  greater  moderation.  While  recognising  the  claims  of 
deduction,  he  thought  that  history  and  observation  would  give  new 
life  and  lend  a  practical  interest  to  economics.  The  remoteness  and 
unreality  of  the  Ricardian  school  constituted  its  greatest  weak- 
ness, and  social  reform  would  in  his  opinion  greatly  benefit  by  the 
introduction  of  new  methods.  Toynbee  would  undoubtedly  have 
exercised  tremendous  influence ;  but  his  life,  full  of  the  brightest 
hopes,  was  cut  short  at  thirty. 

The  lead  had  been  given ;  the  study  of  economic  institutions 
and  classes  was  henceforth  to  occupy  a  permanent  position  in 
English  economic  writings,  and  the  remarkable  works  which  have 
since  been  published,  such  as  Cunningham's  Growth  of  English 
Industry  and  Commerce,  Ashley's  Economic  History,  the  Webbs' 

showing  the  gross  injustice  which  was  blindly  perpetrated  during  this  growth." 
(Industrial  Revolution,  p.  58.) 

1  The  first  edition  appeared  in  1857. 


388  THE  HISTORICAL  SCHOOL 

Trade  Unionism  and  Industrial  Democracy,  Booth's  Life  and  Labour 
of  the  People,  bear  witness  to  the  profound  influence  exerted  by  the 
new  ideas. 

In  France  the  success  of  the  movement  has  not  been  quite  so 
pronounced,  although  the  need  for  it  was  as  keenly  felt  there. 
Although  it  did  not  result  in  the  founding  of  a  French  school  of 
economic  historians,  the  new  current  of  ideas  has  influenced  French 
economic  thought  in  a  thousand  ways.  In  1878  political  economy 
became  a  recognised  subject  in  the  various  curricula  of  the  Facultes 
de  Droit.  The  intimate  connection  between  economic  study  and 
the  study  of  law  has  given  an  entirely  new  significance  to  political 
economy,  and  the  science  has  been  entirely  transformed  by  the 
infusion  of  the  historical  spirit.  At  the  same  time  professional 
historians  have  become  more  and  more  interested  in  problems  of 
economic  history,  thus  bringing  a  spirit  of  healthy  rivalry  into  the  study 
of  economic  institutions.  Several  Liberal  economists  also,  without 
breaking  with  the  Classical  tradition,  have  devoted  their  energies  to  the 
close  observation  of  contemporary  facts  or  to  historical  research.1 

Finally,  we  have  a  new  group  of  workers  in  the  sociologists. 
Sociology  is  interested  in  the  origin  and  growth  of  social  institutions 
of  all  kinds  and  in  the  influence  which  they  have  exerted  upon  one 
another.  After  studying  institutions  of  a  religious,  legal,  political, 
or  social  character  it  is  only  natural  that  they  should  ask  that  the 
study  of  economic  institutions  should  be  carried  on  in  the  same 
spirit  and  with  the  help  of  the  same  method.  This  object  has  been 
enthusiastically  pursued  for  some  time.  The  mechanism  and  the 
organisation  of  the  economic  system  at  different  periods  have  been 
closely  examined  by  the  aid  of  observation  and  history.  Abstraction 
has  been  laid  aside  and  a  preference  shown  for  minute  observation, 
and  for  induction  rather  than  deduction.1 


II  :  THE  CRITICAL  IDEAS  OF  THE  HISTORICAL  SCHOOL 

AMONG  so  many  writers  whose  works  cover  such  a  long  period  of 
time  we  can  hardly  expect  to  find  absolute  unanimity,  and  we  have 

1  We  would  specially  mention  Levasseur's  excellent  work,  Histoire  dea 
Classes  ouvrieres  en  France  (first  edition,  1867). 

*  More  especially  we  must  mention  the  group  of  workers  associated  with 
M.  Durkheim  and  the  Anne  sociologique.  But  it  would  be  a  great  mistake  to 
confuse  the  two  methods,  the  Historical  and  the  Sociological.  See  Simiand, 
Methode  historique  et  Science  sociale,  in  the  Revue  de  Synthese  historique,  1903. 
See  also  La  M&hode  positive  en  Science  iconomique  (Paris,  1912),  which  contains  a 
study  of  the  methodological  problems  presented  by  political  economy. 


CRITICAL  IDEAS  889 

already  had  occasion  to  note  some  of  the  more  important  divergencies 
between  them,  especially  those  separating  the  newer  from  the  older 
writers  of  the  Historical  school.  We  cannot  here  enter  into  a  full 
discussion  of  all  these  various  shades  of  opinion,  and  we  must  be 
content  to  mention  the  more  important  features  upon  which  they 
are  almost  entirely  at  one,  noticing  some  of  the  principal  individual 
doctrines  by  the  way. 

The  German  Historical  school  made  its  debut  with  a  criticism 
of  Classical  economics,  and  we  cannot  better  begin  than  with  a  study 
of  its  critical  ideas.1 

Although  these  ideas  had  already  found  expression  in  the  writings 
of  Knies,  Hildebrand,  and  Roscher,  there  was  nothing  like  the  dis- 
cussion which  was  provoked  by  them  when  the  newer  Historical 
school,  at  a  much  later  period,  again  brought  them  to  public  notice. 
The  publication  of  Karl  Menger's  work,  Untersuchwngen  iiber  die 
Methode  der  Socialwissenschaften,  in  1883 — a  classic  both  in  style  and 
matter — ushered  in  a  new  era  of  active  polemics.  This  remarkable 
work,  in  which  the  author  undertakes  the  defence  of  pure  political 
economy  against  the  attacks  of  the  German  Historical  school, 
was  received  with  some  amount  of  ill-feeling  by  the  members  of 
that  school,2  and  it  caused  a  general  searching  of  hearts  during  the 
next  few  years.  We  must  try  to  bring  out  the  essential  elements 
in  the  discussion,  and  contrast  the  arguments  advanced  by  the 
Historians  with  the  replies  offered  by  their  critics. 

Broadly  speaking,  three  charges  are  levelled  at  the  Classical 
writers,  (i)  It  is  pointed  out  that  their  belief  in  the  universality 
of  their  doctrines  is  not  easily  justified,  (ii)  Their  psychology  is 
said  to  be  too  crude,  based  as  it  is  simply  upon  egoism,  (iii)  Their 

1  There  is  one  aspect  of  the  critical  work  of  the  German  school'  with  which 
we  have  not  dealt  in  this  book — namely,  the  criticism  of  laissez-faire.  Some  of 
the  members,  e.g.  Hildebrand,  have  insisted  on  the  ethical  criterion,  but  none 
of  them  share  in  the  optimism  of  either  Smith  or  Bastiat.  The  emphasis  laid 
upon  relativity  made  this  quite  impossible.  But  all  the  more  eminent  writers 
have  remained  faithful  to  the  Liberal  teaching  of  the  founders.  See  Hilde- 
brand's  confession  of  faith  at  the  beginning  of  vol.  i  of  the  Jdhrbucher  fur 
Nationaldkonornie,  1863,  vol.  i,  p.  3.  And  although  some  of  them,  e.g.  Brentano 
and  Schmoller,  seem  to  be  connected  with  the  new  current  of  ideas  that  gave 
rise  to  State  Socialism,  the  association  was  quite  accidental.  They  never  con- 
sidered it  an  organic  part  of  their  teaching,  and  they  made  no  very  original 
contribution  to  that  part  of  the  study.  Their  connection  with  economics  must 
always  depend  upon  the  light  which  they  have  thrown  upon  the  question  of 
method. 

*  Cf.  Schmoller 's  account  of  Menger's  work  published  in  the  Jahrbuch  in  1884. 
The  article  appears  also  in  the  volume  entitled  Zur  Litteraturgeschichte  der  Stoat*- 
und  Sozialwissenschaften  (1888). 


390  THE  HISTORICAL  SCHOOL 

use,  or  rather  abuse,  of  the  deductive  method  is  said  to  be  wholly 
unjustifiable.     We  will  review  these  charges  seriatim. 

The  Historians  held  that  the  greatest  sin  committed  by  Smith 
and  his  followers  was  the  inordinate  stress  which  they  laid  upon  the 
universality  of  their  doctrines.  Hildebrand  applies  the  term  "  univer- 
salism  "  to  this  feature  of  their  teaching,  while  Knies  refers  to  it  as  "  ab- 
solutism "  or  "  perpetualism."  The  belief  of  the  Anglo-French  school, 
according  to  their  version  of  it,  was  that  the  economic  laws  which  they 
had  formulated  were  operative  everywhere  and  at  all  times,  and  that 
the  system  of  political  economy  founded  upon  them  was  universal 
in  its  application.  The  Historians,  on  the  other  hand,  maintained 
that  these  laws,  so  far  from  being  categorically  imperative,  should  be 
regarded  always  as  being  subject  to  change  in  both  theory  and  practice. 

First  with  regard  to  practice.  A  uniform  code  of  economic 
legislation  cannot  be  indifferently  applied  to  all  countries  at  all 
epochs  of  their  history.  An  attempt  must  be  made  to  adapt  it  to 
the  varied  conditions  of  time  and  place.  The  statesman's  art 
consists  in  adapting  principles  to  meet  new  demands  and  in  invent- 
ing solutions  for  new  problems.  But,  as  Menger  points  out,  this 
obvious  principle,  which  was  by  no  means  a  new  one,  would  have 
met  with  the  approval  of  Smith  and  Say,  and  even  of  Ricardo 
himself ;  x  although  they  occasionally  forgot  it,  perhaps,  especially 
when  judging  the  institutions  of  the  past  or  when  advocating  the 
universal  adoption  of  laissez-faire. 

The  second  idea,  namely,  that  economic  theory  and  economic 
laws  have  only  a  relative  value,  is  treated  with  even  greater  emphasis, 
and  this  was  another  point  on  which  the  older  economists  had  gone 
wrong.  Economic  laws,  unlike  the  laws  of  physics  and  chemistry, 
with  which  the  Classical  writers  were  never  tired  of  comparing  them, 
have  neither  the  universality  nor  the  inevitability  of  the  latter.  Knies 
has  laid  special  stress  on  this  point.  "  The  conditions  of  economic 
life  determine  the  form  and  character  of  economic  theory.  Both 
the  process  of  argument  employed  and  the  results  arrived  at  are 
products  of  historical  development.  The  arguments  are  based 
upon  the  facts  of  concrete  economic  life  and  the  results  bear  all  the 
marks  of  historical  solutions.  The  generalisations  of  economics 
are  simply  historical  explanations  and  progressive  manifestations  of 
truth.  Each  step  is  a  generalisation  of  the  truth  as  it  is  known 

1  Cf.  Menger,  foe.  cit.,  pp.  ISQetseq.  Marshall's  ironical  remark  is  very  apposite 
here :  "  German  economists  have  done  good  service  by  insisting  on  this  class  of 
consideration,  but  they  seem  to  be  mistaken  in  supposing  that  it  was  overlooked 
by  the  older  English  economists."  (Principles.  Book  I,  chap.  6,  note.) 


CRITICAL  IDEAS  391 

at  that  particular  stage  of  development.  No  single  formula  and  no 
collection  of  such  formulae  can  ever  claim  to  be  final."  l 

This  paragraph,  though  somewhat  obscure  and  diffuse,  as  is  often 
the  case  with  Knies,  expresses  a  sound  idea  which  other  economists 
have  stated  somewhat  differently,  by  saying  that  economic  laws 
are  at  once  provisional  and  conditional.  They  are  provisional  in 
the  sense  that  the  progress  of  history  continually  gives  rise  to  new 
facts  of  which  existing  theories  do  not  take  sufficient  account. 
Hence  the  economist  finds  himself  obliged  to  modify  the  formulae 
with  which  he  has  hitherto  been  quite  content.  They  are  conditional 
in  the  sense  that  economic  laws  are  only  true  so  long  as  other 
circumstances  do  not  hinder  their  action.  The  slightest  change  in 
the  conditions  as  ordinarily  given  might  cancel  the  usual  result. 
Those  economists  who  thought  of  their  theory  as  a  kind  of  final 
revelation,  or  considered  that  their  predictions  were  absolutely 
certain,  needed  reminding  of  this. 

But  Knies  is  hopelessly  wrong  in  thinking  that  this  relativity  is 
enough  to  separate  the  laws  of  economics  from  the  laws  of  other 
sciences.  Professor  Marshall  justly  remarks  that  chemical  and 
physical  laws  likewise  undergo  transformation  whenever  new  facts 
render  the  old  formulae  inadequate.  All  these  laws  are  provisional. 
They  are  also  hypothetical  in  the  sense  that  they  are  true  only  in  the 
absence  of  any  disturbing  cause.  Scientists  no  longer  consider  these 
laws  as  inherent  in  matter.  They  are  the  product  of  man's  thought 
and  they  advance  with  the  development  of  his  intelligence.8  They  are 
nothing  more  or  less  than  formulae  which  conveniently  express  the 
relation  of  dependence  that  exists  between  different  phenomena ; 
and  between  these  various  laws  as  they  are  framed  by  the  human 
mind  there  is  no  difference  except  a  greater  or  lesser  degree  of  proof 
which  supports  them. 

What  gives  to  the  laws  of  physics  or  chemistry  that  larger  amount 
of  fixity  and  that  greater  degree  of  certainty  which  render  them 
altogether  superior  to  economic  law  as  at  present  formulated  is  a 
greater  uniformity  in  the  conditions  that  give  rise  to  them,  and  the 

1  Knies,  loc.  cit.,  pp.  24-25.  Ashley  gives  an  unmistakable  expression  to 
the  same  opinion  in  his  History.  "  Political  economy  is  not  a  body  of  absolutely 
true  doctrines,  revealed  to  the  world  at  the  end  of  the  last  and  the  beginning  of 
the  present  century,  but  a  number  of  more  or  less  valuable  theories  and  generalisa- 
tions. .  .  .  Modern  economic  theories,  therefore,  are  not  universally  true  ;  they 
are  true  neither  for  the  past,  when  the  conditions  they  postulate  did  not  exist, 
nor  for  the  future,  when,  unless  society  becomes  stationary,  the  conditions  will 
have  changed."  (Preface.) 

1  See  Karl  Pearson,  The  Grammar  of  Science, 


392  TEE  HISTORICAL  SCHOOL 

fact  that  their  action  is  often  measurable  in  accordance  with 
mathematical  principles.1 

Not  only  has  Knies  exaggerated  the  importance  of  his  doctrine 
of  relativity,2  but  the  imputation  that  his  predecessors  had  failed 
to  realise  the  need  for  it  was  hardly  deserved.  We  shall  have  to 
refer  to  this  matter  again.  Mill's  Principles  was  already  published, 
and  even  in  the  Logic,  which  appeared  for  the  first  time  in  1843,  and 
several  editions  of  which  had  been  issued  before  1853,  the  year  when 
Knies  writes,  we  meet  with  the  following  sentence  :  *  "  The  motive 
that  suggests  the  separation  of  this  portion  of  the  social  phenomenon 
from  the  rest  ...  is  that  they  do  mainly  depend  at  least  in  the  first 
resort  on  one  class  of  circumstances  only ;  and  that  even  when  other 
circumstances  interfere,  the  ascertainment  of  the  effect  due  to  the 
one  class  of  circumstances  alone  is  a  sufficiently  intricate  and 
difficult  business  to  make  it  expedient  to  perform  it  once  for  all 
and  then  allow  for  the  effect  of  the  modifying  circumstances." 
Consequently  sociology,  of  which  political  economy  is  simply  a 
branch,  is  a  science  of  tendencies  and  not  of  positive  conclusions. 
No  better  expression  of  the  principle  of  relativity  could  ever  be  given. 

Notwithstanding  all  this,  modern  economists  have  come  to  the 
conclusion  that  the  criticisms  of  the  Historical  school  are  sufficiently 
well  founded  to  justify  them  in  demanding  greater  precision  so  as 
to  avoid  those  mistakes  in  the  future.  Dr.  Marshall,  for  one,  adopts 
Mill's  expression,  and  defines  an  economic  law  as  "a  statement  of 
economic  tendencies.  *'  4 

Even  the  founders  of  pure  political  economy,  although  their 
method  is  obviously  very  different  from  that  of  the  Historians,  have 
taken  similar  precautions.  They  expressly  declare  that  the  con- 
clusions of  the  science  are  based  upon  a  certain  number  of  preliminary 
hypotheses  deliberately  chosen,  and  that  the  said  conclusions  are 
only  provisionally  true.  "Pure  economics,"  says  Walras,  "has  to 
borrow  its  notion  of  exchange,  of  demand  and  supply,  of  capital 
and  revenue,  from  actual  life,  and  out  of  those  conceptions  it  has  to 

1  Marshall,  Principles,  4th  ed.,  Book  I,  chap.  6,  §  6. 

What  we  say  about  the  mathematical  method  does  not  imply  any  criticism 
of  the  Mathematical  method  in  political  economy.  To  establish  mathematical 
relations  between  economic  phenomena,  as  Walras  and  his  school  did,  and  to 
deduce  economic  conclusions  from  general  mathematical  theories  are  two 
different  things. 

'  Knies  employs  the  differences  there  set  up  in  order  to  deny  that  economic 
laws  have  even  the  character  of  national  laws.  The  new  Historical  school  does 
not  go  quite  go  far,  as  we  shall  see  presently. 

•  Chap.  4,  "  Of  the  Logic  of  the  Moral  Sciences." 

•  Principles,  Book  I,  chap.  6,  §  6. 


CRITICAL  IDEAS  393 

build  the  ideal  or  abstract  type  upon  which  the  economist  exercises 
his  reasoning  powers."  l  Pure  economics  studies  the  effects  of  com- 
petition, not  under  the  imperfect  conditions  of  an  actual  market, 
but  as  it  would  operate  in  a  hypothetical  market  where  each 
individual,  knowing  his  own  interests,  would  be  able  to  pursue  them 
quite  freely,  and  in  full  publicity.  The  conception  of  a  limited 
area  within  which  competition  is  fully  operative  enables  us  to  study 
as  through  a  magnifying-glass  the  results  of  a  hypothesis  that  really 
very  seldom  operates  in  the  economic  life  of  to-day. 

We  may  dispute  the  advantages  of  such  a  method,  but  we  cannot 
say  that  the  economists  ever  wished  to  deny  the  relativity  of  a 
conclusion  arrived  at  in  this  fashion. 

While  willing  to  admit  that  the  Historians  have  managed  to 
put  this  characteristic  in  a  clear  light  just  when  some  economists 
were  in  danger  of  forgetting  it,  and  that  it  is  a  universally  accepted 
doctrine  to-day,  we  cannot  accept  Knies's  contention  that  it  affords 
a  sufficient  basis  for  the  distinction  between  natural  and  economic 
laws.  And  such  is  the  opinion  of  a  large  number,  if  not  of  the 
majority,  of  economists.8 

The  second  charge  is  levelled  against  the  narrowness  and 
insufficiency  of  the  psychology.  Adam  Smith  treated  man  as  a 
being  solely  dominated  by  considerations  of  self-interest  and  com- 
pletely absorbed  in  the  pursuit  of  gain.  But,  as  the  Historians 
justly  point  out,  personal  interest  is  far  from  being  the  sole  motive, 
even  in  the  economic  world.  The  motives  here,  as  elsewhere,  are 
extremely  varied  :  vanity,  the  desire  for  glory,  pleasure  afforded  by 
the  work  itself,  the  sense  of  duty,  pity,  benevolence,  love  of  kin,  or 
simply  custom.8  To  say  that  man  is  always  and  irremediably 
actuated  by  purely  selfish  motives,  says  Knies,  is  to  deny  the 
existence  of  any  better  motive  or  to  regard  man  as  a  being  having 
a  number  of  centres  of  psychical  activity,  each  operating  indepen- 
dently of  the  other.4 

We  cannot  deny  that  the  Classical  writers  believed  that 
**  personal  interest " — not  in  the  sense  of  egoism,  which  is  the  name 
given  it  by  Knies,  and  which  somewhat  distorts  their  view — held  the 
key  to  the  significance  and  origin  of  economic  life.  But  the  claims 
of  the  Historians  are  again  immoderate.  Being  themselves  chiefly 
concerned  with  concrete  reality  in  all  its  complexity  of  being,  and 

1  Walras,  Economic  politique  pure. 

1  Some  authors  would  not  admit  complete  assimilation;  e.g.  Wagner 
(Orundlegung,  voL  i,  p.  335). 

1  Sohmoller  especially  insists  on  this  point.  *  Knies,  op.  cti.,  p.  23. 


394  THE  HISTORICAL  SCHOOL 

with  all  its  distinctive  and  special  features  rather  than  its  general 
import,  they  forgot  that  the  primary  aim  of  political  economy  is 
to  study  economic  phenomena  en  masse.  The  Classical  economists 
studied  the  crowd,  not  the  individual.  If  we  neglect  the  differences 
that  occasionally  arise  in  special  cases,  and  allow  for  the  personal 
equation,  do  we  not  .find  that  the  most  constant  motive  to  action  is 
just  this  personal  desire  for  well-being  and  profit  ?  This  is  the 
opinion  of  Wagner,  who  on  this  question  of  method  is  not  quite  in 
agreement  with  other  members  of  the  school.  In  his  suggestive  study 
of  the  different  motives  that  influence  economic  conduct  he  definitely 
states  that  the  only  motive  that  is  really  constant  and  permanent  in 
its  action  is  this  self-interest.  "  This  consideration,"  he  says,  "  does 
something  to  explain  and  to  justify  the  conduct  of  those  writers  who 
took  this  as  the  starting-point  of  their  study  of  economics."1 

But  having  admitted  this,  we  must  also  recognise,  not  that  they 
denied  the  changes  occasionally  undergone  by  self-interest  under  the 
pressure  of  other  motives,  as  Knies  suggests,  but  that  they  have 
neglected  to  take  sufficient  account  of  such  modifications.  Some- 
times it  really  seems  as  if  they  would  "  transform  political  economy 
into  a  mere  natural  history  of  egoism,"  as  Hildebrand  says. 

We  can  only  repeat  the  remark  which  we  have  already  made, 
namely,  that  when  this  criticism  was  offered  it  was  scarcely  justified. 
Stuart  Mill  had  drawn  attention  to  this  point  in  his  Logic  ten  years 
previously.2  "  An  English  political  economist,  like  his  countrymen 
in  general,  has  seldom  learned  that  it  is  possible  that  men  in  conduct- 
ing the  business  of  selling  their  goods  over  the  counter  should  care 
more  about  their  ease  or  their  vanity  than  about  their  pecuniary 
gain."  For  his  own  part  he  ventures  to  say  that  "  there  is  perhaps 
no  action  of  a  man's  life  in  which  he  is  neither  under  the  immediate 
nor  under  the  remote  influence  of  any  impulse  but  the  mere  desire 
of  wealth."  3 

It  is  evident  that  Mill  did  not  think  that  self-interest  was 
the  one  unchangeable  and  universal  human  motive.  Much  less 
"  egoism,"  for,  as  we  have  seen  in  the  previous  chapter,  his  "  egoism  " 
includes  a  considerable  admixture  of  altruism. 

But  here  again  the  strictures  of  the  Historians,  though  somewhat 
exaggerated,  have  forced  economists  of  other  schools  to  be  more 
precise  in  their  statements.  The  economists  of  to-day,  as  Marshall 
remarks,  are  concerned  "  with  man  as  he  is  ;  not  with  an  abstract 
or  '  economic '  man,  but  a  man  of  flesh  and  blood."  *  And  if  the 

1  A.  Wagner,  Grundhgung,  §  67,  *  Vol.  ii,  p.  502. 

1  Logic,  vol.  ii,  p.  497.  *  Principles,  Book  I,  chap.  5,  §  9. 


CRITICAL  IDEAS  895 

economist,  as  Marshall  points  out,  pays  special  attention  to  the  desire 
for  gain  among  the  other  motives  which  influence  human  beings, 
this  is  not  because  he  is  anxious  to  reduce  the  science  to  a  mere 
"  natural  history  of  egoism,"  but  because  in  this  world  of  ours  money 
is  the  one  convenient  means  of  measuring  human  motive  on  a  large 
scale.1  Even  the  Hedonists,  whose  economics  rest  upon  a  calculus 
of  pleasure  and  pain,  are  careful  to  note  that  their  hypothesis  is  just 
a  useful  simplification  of  concrete  reality,  and  that  such  simplification 
is  absolutely  necessary  in  order  to  carry  the  analysis  of  economic  phe- 
nomena as  far  as  possible.  It  is  an  abstraction — imposed  by  neces- 
sity, which  is  its  sole  justification,  but  an  abstraction  nevertheless. 

It  is  just  here  that  the  final  reproach  comes  in,  namely,  the  charge 
of  abusing  the  employment  of  abstraction  and  deduction,  and  greater 
stress  is  laid  upon  this  count  than  upon  either  of  the  other  two. 

Instead  of  deduction  the  new  school  would  substitute  induction 
based  upon  observation. 

Their  criticism  of  the  deductive  method  is  closely  connected  with 
their  attack  upon  the  psychology  of  the  older  school.     The  Classical 
economists  thought,  so  the  Historians  tell  us,  that  all  economic 
laws  could  be  deduced  by  a  simple  process  of  reasoning  from  one 
fundamental  principle.     If  we  consider  the  multiplicity  of  motives 
actually  operative  in  the  economic  world,  the  insufficiency  of  this 
doctrine    becomes    immediately    apparent.     The    result   is    not    a 
faithful   picture,    but   a   caricature   of   reality.     Only   by   patient 
observation  and  careful  induction  can  we  hope  to  build  up  an 
economic  theory  that  shall  take  full  account  of  the  complexity  of 
economic  phenomena.     "  There   is   a  new  future  before    political 
economy,"  writes  Schmoller  in  1883,  in  reply  to  a  letter  of  Menger, 
"  thanks  to  the  use  that  will  be  made  of  the  historical  matter, 
both  descriptive  and  statistical,  that  is  slowly  accumulating.     It 
will  not  come  by  further  distillation  of  the  abstract  propositions  of 
the  old  dogmatism  that  have  already  been  distilled  a  hundred  times."  * 
The  younger  school  especially  has  insisted  on  this  ;  and  Menger 
has  ventured  to  say  that  in  the  opinion  of  the  newer  Historical  school 
"  the  art  of  abstract  thinking,  even  when  distinguished  by  profundity 
and  originality  of  the  highest  order,  and  when  based  upon  a  foundation 
of  wide  experience — in  a  word,  the  exercise  of  that  gift  which  has  in 
other  sciences  resulted  in  winning  the  highest  honour  for  the  thinkers 
— seems  to  be  of  quite  secondary  importance,  if  not  absolutely  worth- 
less, as  compared  with  some  elaborate  compilation  or  other."  * 
1  Marshall,  Principles,  Book  I,  chap.  5,  §  7. 
1  Zur  Litteraturgeschichte,  p.  279. 
•  Untersuchungen  iiber  die  Methode,  p.  279. 


396  THE  HISTORICAL  SCHOOL 

But  the  criticism  of  the  Historical  'school  confuses  two  things, 
namely,  the  particular  use  which  the  Classical  writers  have  made  of 
the  abstract  deductive  method,  and  the  method  itself. 

No  one  will  deny  that  the  Classical  writers  often  started  with 
insufficient  premises.  Even  when  the  premises  were  correct,  they 
were  too  ready  to  think  and  not  careful  enough  to  prove  that  their 
conclusions  were  always  borne  out  by  the  facts.  No  one  can  defend 
their  incomplete  analysis,  their  hasty  generalisations,  or  their 
ambiguous  formulae.1 

But  this  is  very  different  from  denying  the  legitimacy  of  abstrac- 
tion and  deduction.  To  isolate  a  whole  class  of  motives  with  a  view 
to  a  separate  examination  of  their  effects  is  not  to  deny  either  the 
presence  or  the  action  of  other  motives,  any  more  than  a  study  of 
the  effect  of  gravitation  upon  a  solid  involves  the  denial  of  the 
action  of  other  forces  upon  it.  In  a  science  like  political  economy, 
where  experiment  is  practically  impossible,  abstraction  and  analysis 
afford  the  only  means  of  escape  from  those  other  influences  which 
complicate  the  problems  so  much.  Even  if  the  motives  chosen  were 
of  secondary  importance,  the  procedure  would  be  quite  legitimate, 
although  the  result  would  not  be  of  any  great  moment.  But  it  is 
of  the  greatest  service  and  value  when  the  motive  chosen  is  one, 
like  the  search  for  gain  or  the  desire  for  personal  satisfaction,  which 
exercises  a  preponderant  influence  upon  economic  action.2 

So  natural,  we  may  even  say  so  indispensable,  is  abstraction, 
if  we  are  to  help  the  mind  steer  its  way  amid  the  complexity 
of  economic  phenomena,  that  the  criticism  of  the  Historical  school 
has  done  nothing  to  hinder  the  remarkable  development  which  has 
resulted  from  the  use  of  the  abstract  method  during  the  last  thirty 

1  The  English  economists,  even  the  most  eminent,  are  often  mistaken,  says 
Wagner  (Grundlequng,  chap.  4,  §  4),  but  their  errors  are  not  to  be  imputed  to 
their  method  so  much  as  to  the  use  they  make  of  it.  And  Menger,  who  so  ener- 
getically undertook  the  defence  of  deduction,  further  undertakes  to  renew  the 
Classical  theories.  Economic  theory,  says  he,  as  constituted  by  the  English 
Classical  school,  has  not  succeeded  in  giving  us  a  satisfactory  science  of  economic 
laws  (Menger,  loc.  cit.,  p.  15). 

1  Ci  Menger,  loc.  cit.,  p.  79  :  "  The  student  of  pure  mechanics  does  not  deny 
the  existence  of  air  or  friction,  any  more  than  the  student  of  pure  mathematics 
denies  the  existence  of  real  bodies,  of  surfaces,  and  lines,  or  the  student  of  pure 
chemistry  denies  the  influence  of  physical  forces  or  the  physicist  the  presence 
of  chemical  factors  in  actual  phenomena,  although  each  of  these  sciences  only 
considers  one  side  of  the  real  world,  making  an  abstraction  of  every  other  aspect 
of  it.  Nor  does  the  economist  pretend  that  men  are  only  moved  by  egoism  or 
that  they  are  infallible  and  omniscient  because  they  envisage  social  life  from 
the  point  of  view  of  the  free  play  of  individual  interest  uninfluenced  by  other  con- 
aiderations,  by  sin  or  ignorance,"  Wagner  and  Marshall  take  the  same  view. 


CRITICAL  IDEAS  397 

years.  But,  although  the  Neo-Classical  school  has  succeeded  in 
replacing  the  old  methods  in  their  position  of  honour  once  more,  it 
no  longer  employs  those  methods  in  the  way  the  older  writers  did. 
A  more  solid  foundation  has  been  given  them  in  a  more  exact 
analysis  of  the  needs  which  personal  interest  ought  to  satisfy.1  And 
the  mechanism  of  deduction  itself  has  been  perfected  by  a  more 
rigid  use  of  the  ordinary  logical  forms,  and  by  the  adoption  of 
mathematical  phraseology. 

Happily  the  controversy  as  to  the  merits  of  the  rival  methods, 
which  was  first  raised  by  the  Historical  school,  has  no  very  great 
interest  at  the  present  moment.  Most  eminent  economists  consider 
that  both  are  equally  necessary.  There  seems  to  be  a  general 
agreement  among  writers  of  different  schools  to  consider  the  question 
of  method  of  secondary  importance,  and  to  forget  the  futile  contro- 
versies from  which  the  science  has  gained  so  little.  Before  conclud- 
ing this  section  it  may  be  worth  while  to  quote  the  opinion  of  men 
who  represent  very  different  tendencies,  but  are  entirely  agreed  with 
regard  to  this  one  subject.  **  Discussion  of  method,"  says  Pareto, 
"  is  a  pure  waste  of  time.  The  aim  of  the  science  is  to  discover 
economic  uniformities,  and  it  is  always  right  to  follow  any  path 
or  to  pursue  any  method  that  is  likely  to  lead  to  that  end."  2  "  For 
this  and  other  reasons,"  says  Marshall,  "  there  always  has  been, 
and  there  probably  always  will  be,  a  need  for  the  existence  side  by 
side  of  workers  with  different  aptitudes  and  different  aims.  .  .  .  All 
the  devices  for  the  discovery  of  the  relations  between  cause  and 
effect  which  are  described  in  treatises  on  scientific  method  have  to 
be  used  in  their  turn  by  the  economist."  3 

These  writers  generally  employ  the  abstract  method.  Let  us  now 
hear  some  of  the  Historians.  Schmoller  is  the  author  of  that  oft- 
quoted  phrase,  "Induction  and  deduction  are  both  necessary  for 
the  science,  just  as  the  right  and  left  foot  are  needed  for  walking."  * 

More  remarkable  still,  perhaps,  is  the  opinion  of  Bticher,  an 

1  So  great  ia  the  respect  for  psychology  among  the  deductive  writers  of  to-day 
that  it  has  been  suggested  that  the  Austrian  school  should  be  known  as  the 
Psychological  school.  We  can  say  that  they  have  done  much  more  in  this 
direction  than  the  Historical  school. 

1  Manudle  di  Economia  -politico,,  p.  24  (Milan,  1906). 

1  Principles,  4th  ed.,  Book  I,  chap.  3. 

•  Handwdrtcrbuch  der  Staatswiesen»chaften.  In  his  Grundriss  we  read  :  "  The 
writers  who  figure  as  representatives  of  inductive  research  in  recent  German 
economics  are  not  opposed  to  the  practice  of  deduction  as  such,  but  they  do 
believe  that  it  is  too  often  based  upon  superficial  and  insufficient  principles  and 
that  other  principles  derived  from  a  more  exact  observation  of  facts  might  very 
well  be  substituted  for  these."  Everyone  would  subscribe  to  this  view. 


398  THE  HISTORICAL  SCHOOL 

author  to  whom  the  Historical  school  is  indebted  for  some  of  its 
most  valuable  contributions.  "  It  is  therefore  a  matter  of  great 
satisfaction  that,  after  a  period  of  diligent  collection  of  material,  the 
economic  problems  of  modern  commerce  have  in  recent  times  been 
zealously  taken  up  again  and  that  an  attempt  is  being  made  to 
correct  and  develop  the  old  system  in  the  same  way  in  which  it 
arose,  with  the  aid,  however,  of  a  much  larger  store  of  facts.  For 
the  only  method  of  investigation  which  will  enable  us  to  approach 
the  complex  causes  of  commercial  phenomena  is  that  of  abstract 
isolation  and  logical  deduction.  The  sole  inductive  process  that  can 
likewise  be  considered — namely,  the  statistical — is  not  sufficiently 
exact  and  penetrating  for  most  of  the  problems  that  have  to  be 
handled  here,  and  can  be  employed  only  to  supplement  or  control."  l 


III :  THE  POSITIVE  IDEAS  OF  THE  HISTORICAL  SCHOOL 
WHAT  made  the  criticism  of  the  Historians  so  penetrating  was  the 
fact  that  they  held  an  entirely  different  view  concerning  the  scope 
and  aim  of  economics.  Behind  the  criticism  lurked  the  counter- 
theory.  Nothing  less  than  a  complete  transformation  of  the  science 
would  have  satisfied  the  founders,  but  the  younger  school  soon 
discovered  that  so  ambitious  a  scheme  could  never  be  carried  out. 
It  is  important  that  we  should  know  something  of  the  view  of 
those  older  writers  on  this  question,  and  the  way  they  had  intended 
to  give  effect  to  their  plans.  The  positive  contribution  made  by  the 
Historical  school  to  economic  study  is  even  more  important  than 
its  criticisms,  for  it  gives  a  clue  to  an  entirely  different  point  of 
view  with  which  we  are  continually  coming  into  contact  in  our 
study  of  economic  doctrines. 

The  study  of  economic  phenomena  may  be  approached  from  two 
opposite  standpoints,  which  we  may  designate  the  mechanical  and 
the  organic.  The  one  is  the  vantage-ground  of  those  thinkers  who  love 
generalisations,  and  who  seek  to  reduce  the  complexity  of  the  economic 
world  to  the  compass  of  a  few  formulae ;  the  other  of  those  writers  who 
are  attracted  by  the  constant  change  which  concrete  reality  presents. 

The  earlier  economists  for  the  most  part  belonged  to  the  former 
class.  Amid  all  the  wealth  and  variety  of  economic  phenomena 
they  confined  their  attention  almost  entirely  to  those  aspects  that 
could  be  explained  on  simple  mechanical  principles.  Such  were  the 
problems  of  price  fluctuations,  the  rate  of  interest,  wages,  and  rent. 
Production  adapting  itself  to  meet  variation  in  demand,  with  no  guide 
1  Die  Entstehung  der  Volkswirtschaft,  Dr.  Wickett's  translation. 


POSITIVE  IDEAS  899 

save  personal  interest,  looked  for  all  the  world  like  the  intermolecular 
action  of  free  human  beings  in  competition  with  one  another.  The 
simplicity  of  the  idea  was  not  without  a  certain  grandeur  of  its  own. 

But  such  a  conception  of  economic  life  is  an  extremely  limited 
one.  A  whole  mass  of  economic  phenomena  of  the  highest  import- 
ance and  of  the  greatest  interest  is  left  entirely  outside.  The 
phenomena  of  the  economic  world,  as  a  matter  of  fact,  are  extremely 
varied  and  changeable.  There  are  institutions  and  organisations 
without  number,  banks  and  exchanges,  associations  of  masters  and 
unions  of  men,  commercial  leagues  and  co-operative  societies. 
Eternal  struggle  between  the  small  tradesman  and  the  big  manu- 
facturer, between  the  merchant  and  the  combine,  between  the 
peasant  proprietor  and  the  great  landowner,  between  classes  and 
individuals,  between  public  and  private  interests,  between  town  and 
country,  is  the  common  feature  of  economic  life.  A  state  rises  to 
prosperity  again  to  fall  to  ruin.  Competition  at  one  moment  makes 
it  superior,  at  another  reduces  its  lead.  A  country  changes  its 
commercial  policy  at  one  period  to  reintroduce  the  old  regime  at 
another.  Economic  life  fulfils  its  purposes  by  employing  different 
organs  that  are  continually  modified  to  meet  changing  conditions, 
and  are  gradually  transformed  as  science  progresses  and  manners 
and  beliefs  are  revolutionised. 

Of  all  this  the  mechanical  conception  tells  us  nothing.  It  makes 
no  attempt  to  explain  the  economic  differences  which  separate 
nations  and  differentiate  epochs.  Its  theory  of  wages  tells  us 
nothing  about  the  different  classes  of  work-people,  or  of  their  well- 
being  during  successive  periods  of  history,  or  about  the  legal  and 
political  conditions  upon  which  that  well-being  depends.  Its  theory 
of  interest  tells  us  nothing  of  the  various  forms  under  which  interest 
has  appeared  at  different  times,  or  of  the  gradual  evolution  of 
money,  whether  metallic  or  paper.  Its  theory  of  profits  ignores 
the  changes  which  industry  has  undergone,  its  concentration  and 
expansion,  its  individualistic  nature  at  one  moment,  its  collective 
trend  at  another.  No  attempt  is  made  to  distinguish  between 
profits  in  industry  or  commerce  and  profits  in  agriculture.  The 
Classical  economists  were  simply  in  search  of  those  universal  and 
permanent  phenomena  amid  which  the  homo  ceconomicv*  most  readily 
betrayed  his  character. 

The  mechanical  view  is  evidently  inadequate  if  we  wish  to 
delineate  concrete  economic  life  in  all  its  manifold  activity.  We 
are  simply  given  certain  general  results,  which  afford  no  clue  to  the 
concrete  and  special  character  of  economic  phenomena. 


400  THE  HISTORICAL  SCHOOL 

The  weakness  of  the  mechanical  conception  arises  out  of  the 
fact  that  it  isolates  man's  economic  activity,  but  neglects  his  environ- 
ment. The  economic  action  of  man  must  influence  his  surroundings. 
The  character  of  such  action  and  the  effects  which  follow  from  it 
differ  according  to  the  physical  and  social,  the  political  and  religious 
surroundings  wherein  they  are  operative.  A  country's  geographical 
situation,  its  natural  resources,  the  scientific  and  artistic  training  of 
its  inhabitants,  their  moral  and  intellectual  character,  and  even 
their  system  of  government,  must  determine  the  nature  of  its 
economic  institutions,  and  the  degree  of  well-being  or  prosperity 
enjoyed  by  its  inhabitants.  Wealth  is  produced,  distributed,  and 
exchanged  in  some  fashion  or  other  in  every  stage  of  social  develop- 
ment, but  each  human  society  forms  a  separate  organic  unit,  in 
which  these  functions  are  carried  out  in  a  particular  way,  giving, 
accordingly,  to  that  society  a  distinctive  character  entirely  its 
own.  If  we  want  to  understand  all  the  different  aspects  of  this  life 
we  must  make  a  study  of  its  economic  activity,  not  as  it  were  in 
vacuo,  but  in  connection  with  the  medium  through  which  it  finds  ex- 
pression, and  which  alone  can  help  us  to  understand  its  true  nature.1 

This  was  the  first  doctrine  on  which  they  laid  stress  :  the  other 
follows  immediately.  This  social  environment  cannot  be  regarded 
as  fixed.  It  is  constantly  undergoing  some  change.  It  is  in  process 
of  transformation  and  of  evolution.  At  no  two  successive  moments 
of  its  existence  is  it  quite  the  same.  Each  successive  stage  calls  for 
explanation,  which  history  alone  can  give,  Goethe  has  given 
utterance  to  this  thought  in  a  memorable  phrase  which  serves  as  a 
kind  of  epigraph  to  Schmoller's  great  work,  the  Grundriss.  "A 
person  who  has  no  knowledge  of  the  three  thousand  years  of  history 
which  have  gone  by  must  remain  content  to  dwell  in  obscurity, 
living  a  hand-to-mouth  existence."  We  must  have  some  knowledge 
of  the  previous  stages  of  economic  development  if  we  are  to  under- 
stand the  economic  life  of  the  present.  Just  as  naturalists  and 
geologists  in  their  anxiety  to  understand  the  present  have  invented 
hypotheses  to  explain  the  evolution  of  the  globe  and  of  living 
matter  upon  it,  so  must  the  student  of  economics  return  to  the 
distant  past  if  he  wants  to  get  hold  of  the  industrial  life  of  to-day. 
"  Man  as  a  social  being,"  says  Hildebrand,  "  is  the  child  of  civilisa- 

1  "  National  life,  like  every  other  form  of  existence,  forms  a  whole  of  which 
the  different  parts  are  very  intimately  connected.  Complete  understanding 
even  of  a  single  aspect  of  it  requires  a  careful  study  of  the  whole.  Language, 
religion,  arts  and  sciences,  law,  politics  and  economics  must  all  be  laid  under 
tribute."  (Roscher,  Principles.)  Cf.  also  Hildebrand,  Die  Nationalokonomie  def 
Gegemvart  und  Zukunft,  p.  29.  This  is  also  Kniee's  thought 


POSITIVE  IDEAS  401 

tion  and  a  product  of  history.  His  wants,  his  intellectual  outlook, 
his  relation  to  material  objects,  and  his  connection  with  other 
human  beings  have  not  always  been  the  same.  Geography  influ- 
ences them,  history  modifies  them,  while  the  progress  of  education 
may  entirely  transform  them."  1 

The  Historians  maintained  that  the  earlier  economists  by  paying 
exclusive  attention  to  those  broader  conclusions  which  had  some- 
thing of  the  generality  of  physical  laws  about  them  had  kept  the 
science  within  too  narrow  limits.  Alongside  of  theory  as  they  had 
conceived  of  it — some  Historians  would  say  instead  of  it — there  is 
room  for  another  study  more  closely  akin  to  biology,  namely,  a  detailed 
description  and  a  historical  explanation  of  the  constitution  of  the 
economic  life  of  each  nation.  Such  is  the  positive  contribution  of 
the  school  to  the  study  of  political  economy,  and  it  fairly  repre- 
sents the  attitude  of  the  present-day  Historians  towards  the  older 
economists. 

Their  aim  was  a  perfectly  natural  and  legitimate  one,  and  at  first 
sight,  at  least,  seemed  very  attractive.  But  beneath  its  apparent 
simplicity  there  is  some  amount  of  obscurity,  and  its  adversaries 
have  thought  that  upon  close  analysis  it  is  really  open  to  serious 
objections. 

In  the  first  place,  is  it  the  aim  of  the  science  to  present  us  with 
an  exact,  realistic  picture  of  society,  as  the  Historians  loved  to  think  ? 
On  the  contrary,  do  we  not  find  that  a  study  can  only  aspire  to 
the  name  of  a  science  in  proportion  as  its  propositions  become  more 
general  in  their  nature  ?  There  is  no  science  without  generalisation, 
according  to  Aristotle,  and  concrete  description,  however  indispens- 
able, is  only  a  first  step  in  the  constitution  of  a  science.  A  science 
must  be  explanatory  rather  than  descriptive. 

Of  course  Historians  are  not  always  content  with  mere  description. 
Some  Historians  have  attempted  explanation  and  have  employed 
history  as  their  organon.  Is  the  choice  a  suitable  one  ? 

"  History,"  says  Marshall,  "  tells  of  sequences  and  coincidences  ; 
but  reason  alone  can  interpret  and  draw  lessons  from  them."  * 

Moreover,  is  there  a  single  important  historical  event  whose  cause 
has  ceased  to  be  a  matter  of  discussion  ?  It  will  be  a  long  time 
before  people  cease  to  dispute  about  the  causes  of  the  Reformation  or 
the  Revolution,  and  the  relative  importance  of  economic,  political, 

1  Die  Nationalokonomie  der  Oegenwart  und  Zukunft,  p.  29. 

1  Principles,  Book  I,  chap.  4,  §  1.  "History,"  says  Wagner  (Grundlegung, 
$  83),  "may  well  affirm  the  existence  of  causal  or  conditional  relations,  but  it 
can  never  prove  it." 


402  THE  HISTORICAL  SCHOOL 

and  moral  influences  in  determining  the  course  of  those  movements 
has  yet  to  be  assigned.  The  causes  that  led  to  the  substitution 
of  credit  for  money  or  money  for  barter  are  equally  obscure.  Before 
narrative  can  become  science  there  must  be  the  preliminary  dis- 
covery by  a  number  of  other  sciences  of  the  many  diverse  laws  whose 
combination  gives  rise  to  concrete  phenomena.1  Not  history  but  the 
sciences  give  the  true  explanation.  The  evolutionary  theory  has 
proved  fruitful  in  natural  history  simply  because  it  took  the  succes- 
sion of  animal  species  as  an  established  fact  and  then  discovered 
that  heredity  and  selection  afforded  a  means  of  explaining  that 
succession.  But  history  cannot  give  us  any  hypothesis  that  can 
rival  the  theory  of  evolution  either  in  its  scientific  value  or  in  its 
simplicity.  In  other  words,  history  itself  is  in  need  of  explanation. 
It  gives  no  clue  to  reality  and  it  can  never  take  the  place  of 
economics.* 

The  earlier  Historians  claimed  a  higher  mission  still  for  the 
historical  study  of  political  economy.  It  must  not  only  afford 
an  explanation  of  concrete  economic  reality,  but  it  must  also  for- 
mulate the  laws  of  economic  development.  This  idea  is  only  held 
by  a  few  of  them,  and  even  the  few  are  not  agreed  as  to  how  it  should 
be  done.  Knies,  for  example,  thinks  that  it  ought  to  be  sufficiently 
general  to  include  the  economic  development  of  all  nations.  Saint- 
Simon  held  somewhat  similar  views.  Others,  and  among  them 
Roscher,  hold  that  there  exist  parallelisms  in  the  history  of  various 
nations ;  in  other  words,  that  every  nation  in  the  course  of  its 
economic  development  passes  through  certain  similar  phases  or 
stages.  These  similarities  constitute  the  laws  of  economics.  If  we 

1  History  may,  as  a  matter  of  fact,  become  explanatory,  but  only  in  a  par- 
ticular sense.  In  other  words,  although  it  cannot  discover  the  general  laws 
regulating  phenomena,  it  may  show  what  special  circumstances  (whose  general 
laws  are  already  supposed  to  be  known)  have  given  rise  to  some  event  equally 
specialised  in  character.  But  every  honest  historian  has  to  admit  that  such 
explanations  are  definitely  personal  and  subjective  in  character.  For  a  recent 
examination  of  these  ideas  from  the  pen  of  a  historian  see  the  profound  yet 
charming  introduction  contributed  by  Meyer  to  the  second  edition  of  his  Oeschichte 
dea  AUerihums.  Of.  also  Simiand,  pp.  14-16. 

*  Cf.  Marshall,  Principles,  Book  I,  chap.  6,  §  4,  and  especially  Menger, 
Untersuchungen,  pp.  15-17  :  "  We  may  be  said  to  have  historical  knowledge  of 
a  particular  phenomenon  when  we  have  traced  its  individual  genesis,  i.e.  when 
we  hare  succeeded  in  representing  to  ourselves  the  concrete  circumstances 
among  which  it  came  into  being,  with  their  proper  qualifications,  etc.  We  may 
be  said  to  have  a  theoretical  knowledge  of  some  concrete  phenomenon  when 
we  are  enabled  to  envisage  it  as  a  particular  instance  of  a  certain  law  or  regularity 
of  sequence  or  coexistence,  i.e.  when  we  are  able  to  give  an  account  of  the  raison 
d'ttrc  and  the  nature  of  its  existence  as  an  exemplification  of  some  general  law." 


POSITIVE  IDEAS  403 

were  to  study  their  movements  in  the  civilisations  of  the  past  we 
might  be  able  to  estimate  their  place  in  existing  societies.1 

Neither  point  seems  very  clear.  Even  if  we  admit  that  there 
is  only  one  general  law  of  human  development  we  cannot  forecast 
the  line  of  progress,  because  scientific  prediction  is  only  applicable 
to  recurrent  phenomena.  They  fail  just  when  the  conditions  are 
new.  Of  course  one  can  always  guess  at  the  nature  of  the  future, 
but  divination  is  not  knowledge.  And  predictions  of  this  kind  are 
almost  always  false.*  Historical  parallelism  rests  on  equally  shaky 
foundations.  A  nation,  like  any  other  living  organism,  passes  through 
the  successive  stages  of  youth,  maturity,  and  old  age,  but  we  are  not 
justified  in  thinking  that  the  successive  phases  through  which  one 
nation  has  passed  must  be  a  kind  of  prototype  to  which  all  others 
must  conform.  All  that  we  can  say  is  that  in  two  neighbouring 
countries  the  same  effects  are  likely  to  follow  from  the  same  causes. 
Production  on  a  large  scale,  for  example,  has  been  accompanied 
by  similar  phenomena  in  most  countries  in  Western  Europe.  But 
this  is  by  no  means  an  inevitable  law.  It  is  simply  a  case  of  similar 
effects  resulting  from  similar  causes.  Such  analogies  are  hardly 
worthy  of  the  name  of  laws.  The  discovery  of  the  law,  as  Wagner 
says,8  may  be  a  task  beyond  human  power ;  and  Schmoller,  as  we 
have  already  seen,  is  of  the  same  opinion. 

One  remark  before  concluding.    There  is  a  striking  similarity 

1  A  full  exposition  of  this  idea  is  given  in  his  Grundriss,  but  Knies,  in  the  name 
of  the  conception  of  a  unique  evolution,  contests  the  view. 

1  This  is  what  M.  Renouvier  thinks  of  this  conception :  "  If  we  proceed 
to  ask  another  question  in  addition  to  the  difficult  one  already  asked  and  inquire 
as  to  the  circumstances  under  which  different  nations  have  advanced  or  declined 
in  the  path  of  goodness  and  of  truth  and  transmitted  their  triumphs  or  their 
defeats  to  the  next  generations,  and  if  we  support  ourselves  in  the  quest  by 
the  belief  that  we  already  have  some  knowledge  of  a  scientific  law  and  conse- 
quently of  the  aim  of  human  society  (this  kind  of  knowledge  generally  begins  with 
formulating  such  aims),  we  shall  find  ourselves  in  the  position  of  a  religious 
prophet  who,  not  merely  content  with  an  inspired  version  of  the  truth,  and  of  the 
destiny  of  mankind,  proceeds  to  expound  to  his  auditors  the  necessity  under 
which  both  preacher  and  auditors  are  compelled  to  believe  and  to  act  in  accord- 
ance with  what  will  undoubtedly  come  to  pass.  Philosophical  and  religious 
imagination  seeks  in  external  observation  the  elements  of  a  confidence  which  it 
can  no  longer  place  in  itself.  History  becomes  a  kind  of  inspiring  divinity.  But 
although  the  object  of  the  illusion  is  different  its  nature  is  still  the  same,  for  the 
new  deity  is  as  little  effective  as  were  the  ancient  ones  in  the  opinion  of  those 
who  have  no  faith  in  it,  and  it  only  inspires  those  who  already  believe."  (Intro- 
duction d  la  Philosophic  analytique  de  VHistoire,  2nd  ed.,  vol.  i,  p.  121.)  Bergson's 
philosophy  also  contests  the  possibility  of  guessing  what  the  future  may  be  like 
from  the  character  of  the  present.  See  especially  Creative  Evolution. 

•  Qrvndlegung,  p.  342, 


404  THE  HISTORICAL  SCHOOL 

between  the  ideas  just  outlined  and  those  of  a  distinguished  philo- 
sopher whose  name  deserves  mention  here,  although  his  influence 
upon  political  economy  was  practically  nil.  We  refer  to  Auguste 
Comte. 

It  is  curious  that  the  earliest  representatives  of  the  school  should 
have  ignored  him  altogether,  but  just  as  Mill  remained  unknown  to 
them,  so  the  Cours  de  Philosophic  positive,  though  published  in  1842, 
remained  a  sealed  book  so  far  as  they  were  concerned.  Comte's 
ideas  are  so  very  much  like  those  of  Knies  and  Hildebrand  that  some 
Positivist  economists,  such  as  Ingram  and  Hector  Denis,  have 
attempted  to  connect  the  Historical  tendency  in  political  economy 
with  the  Positive  philosophy  of  Comte.1 

The  three  fundamental  conceptions  which  formed  the  basis  of  the 
teaching  of  the  Historical  school  are  clearly  formulated  by  Comte. 
The  first  is  the  importance  of  studying  economic  phenomena  in 
connection  with  other  social  facts.  The  analysis  of  the  industrial 
or  economic  life  of  society  can  never  be  carried  on  in  the  **  positive  " 
spirit  by  simply  making  an  abstraction  of  its  intellectual,  political, 
or  moral  life,  whether  of  the  past  or  of  the  present.2  The  second  is 
the  employment  of  history  as  the  organon  of  social  science.  "  Social 
research,"  says  he,  "must  be  based  upon  a  sane  analysis  of  the  all- 
round  development  of  the  best  of  mankind  up  to  the  present  moment, 
and  the  growing  predilection  for  historical  study  in  OUT  time  augurs 
well  for  the  regeneration  of  political  economy."  He  was  fully  per- 
suaded that  the  method  would  foster  scientific  prediction — a  feature 
which  is  bound  to  fuse  all  those  diverse  conditions  which  will  form 
the  basis  of  Positive  politics. 

Comte  wished  to  found  sociology,  of  which  political  economy  was 
to  be  simply  a  branch.  The  Historical  school,  and  especially  Knies, 
regarded  economics  in  the  same  spirit.  Hence  the  analogies  with 
which  Knies  had  to  content  himself,  but  which  the  younger  school 
refused  to  recognise.  But  there  was  a  fundamental  difference 
between  their  respective  points  of  view,  and  this  will  help  us  to 
distinguish  between  them. 

Comte  was  a  believer  in  inevitable  natural  laws,  which,  accord- 
ing to  the  earlier  Historians,  had  wrought  such  havoc.  The 
Historical  method  also,  as  he  conceived  of  it,  was  something  very 
different  from  what  the  older  or  the  newer  Historical  school  took  it 
to  be. 

Adopting  a  dictum  of  Saint-Simon,  Comte  speaks  of  the  Historical 

1  Cf .  Ingram,  History  of  Political  Economy,  and  Denis,  Hiatoire  de*  Systlmea. 
8  A.  Comte,  Cours,  vol.  iv,  p.  198. 


POSITIVE  IDEAS  405 

method  as  an  attempt  to  establish  in  ascending  or  descending  series 
the  curve  of  each  social  institution,  and  to  deduce  from  its  general 
outlines  conclusions  as  to  its  probable  growth  or  decline  in  the 
future.  This  is  how  he  himself  defines  the  process  :  *'  The  essence 
of  this  so-called  historical  spirit,  it  seems  to  us,  consists  in  the  rational 
use  of  what  may  be  called  the  social  series  method,  or,  in  other  words, 
in  the  due  appreciation  of  the  successive  stages  of  human  develop- 
ment as  reflected  in  a  succession  of  historical  facts.  Careful  study 
of  such  facts,  whether  physical,  intellectual,  moral,  or  political, 
reveals  a  continuous  growth  on  the  one  hand  and  an  equally  con- 
tinuous decline  on  the  other.  Hence  there  results  the  possibility 
of  scientific  prophecy  concerning  the  final  ascendancy  of  the  former 
and  the  complete  overthrow  of  the  latter,  provided  always  such 
conclusion  is  in  conformity  with  the  general  laws  of  human  develop- 
ment, the  sociological  preponderance  of  which  must  never  be 
lost  sight  of."  x  It  was  in  virtue  of  this  method  that  Saint- 
Simon  predicted  the  coming  of  industrialism  and  that  Comte 
prophesied  the  triumph  of  the  positive  spirit  over  the  metaphysical 
and  religious. 

There  is  considerable  difference  between  this  attitude  and  the 
Historical  method  as  we  know  it,2  and  the  attempt  at  affiliation  seems 
to  us  altogether  unwarranted.  But  the  coincidence  between  Comte's 
views  and  those  of  Knies  and  Hildebrand  is  none  the  less  remarkable, 
and  it  affords  a  further  proof  of  the  existence  of  that  general  feeling 
which  prompted  certain  writers  towards  the  middle  of  the  century 
to  attempt  a  regeneration  of  political  economy  by  setting  it  free 
from  the  tyranny  of  those  general  laws  which  had  nearly  stifled 
its  life. 

1  Cours,  vol.  iv,  p.  328. 

1  It  is  interesting  to  learn  the  views  of  historians  on  this  point.  Meyer 
thinks  that  the  object  of  history  is  not  to  discover  the  general  laws  of  develop- 
ment, but  to  describe  and  explain  particular  concrete  events  as  they  succeed 
one  another.  Such  descriptions  can  only  be  made  in  accordance  with  the  rules 
of  historical  criticism,  but  explanation  is  only  possible  with  the  aid  of  analogy. 
"  It  is  only  by  the  use  of  analogy  that  the  historian  can  explain  past  events, 
especially  where  there  are  psychological  motives  that  require  analysis.  The 
explanation  thus  given  will  necessarily  be  of  a  subjective  character,  and  from 
its  very  nature  somewhat  problematic."  Cf.  Ed.  Meyer,  Oeschichte  dea  AUerthums, 
Introduction,  2nd  ed.  §§  112  et  eeq.  There  does  not  seem  to  be  any  connec- 
tion between  this  method  and  that  of  Aug.  Comte.  One  becomes  still  more 
convinced  of  this  after  reading  Langlois  and  Seignobos's  Introduction  aux  Etudes 
historiques  or  Q.  Monod's  study  in  historical  method  in  De  la  Mithode  dans 
les  Sciences  (Paris,  1909),  or,  finally,  the  numerous  articles  dealing  with  thie 
question  of  method  which  have  appeared  in  the  Revue  de  Synthese  historique. 


406  THE  HISTORICAL  SCHOOL 

It  seems  to  us,  however,  that  the  Historical  school  is  mistaken 
if  it  imagines  that  history  alone  can  afford  an  explanation  of  the 
present  or  will  ever  enable  us  to  discover  those  special  laws  which 
determine  the  evolution  of  nations. 

On  the  other  hand,  it  has  a  perfect  right  to  demand  a  place  beside 
economic  science,  and  it  is  undoubtedly  destined  to  occupy  a  position 
still  more  prominent  in  the  study  of  economic  institutions,  in  statis- 
tical investigation,  and  above  all  in  economic  history.  Not  only  is 
a  detailed  description  of  the  concrete  life  of  the  present  of  absorbing 
interest  in  itself,  but  it  is  the  condition  precedent  to  all  speculations 
concerning  the  future.  The  theorist  can  never  afford  to  neglect  the 
minute  observation  of  facts  unless  he  wills  that  his  structure  shall 
hang  in  the  void.  Most  abstract  economists  feel  no  hesitation  in 
recognising  this.  For  example,  Jevons,  writing  in  1879,1  gave  it  as 
his  opinion  that  "  in  any  case  there  must  arise  a  science  of  the 
development  of  economic  forces  and  relations." 

This  newer  historical  conception  came  to  the  rescue  just  when  the 
science  was  about  to  give  up  the  ghost,  and  though  they  may  have 
failed  to  give  us  that  synthetic  reconstruction  which  is,  after  all, 
within  the  ability  of  very  few  writers,  its  advocates  have  succeeded 
in  infusing  new  life  into  the  study  and  in  stimulating  new  interest  in 
political  economy  by  bringing  it  again  into  touch  with  contemporary 
life.  They  have  done  this  by  throwing  new  light  upon  the  past  and 
by  giving  us  a  detailed  account  of  the  more  interesting  and  more 
complex  phenomena  of  the  present  time.2  Such  work  must  neces- 
sarily be  of  a  fragmentary  character.  The  school  has  collected  a 
wonderful  amount  of  first-class  material,  but  it  has  not  yet  erected 
that  palace  of  harmonious  proportions  to  which  we  in  our  fond  imagi- 
nation had  likened  the  science  of  the  future.  Nor  has  it  discovered 
the  clue  which  can  help  it  to  find  its  way  through  the  chaos  of 
economic  life.  This  is  not  much  to  be  wondered  at  when  we  remem- 
ber the  shortcomings  of  the  method  to  which  we  have  already  had 
occasion  to  refer.  Indeed,  some  of  the  writers  of  the  school  seem 
fully  convinced  of  this.  Professor  Ashley,  in  an  article  contri- 
buted to  the  Economic  Journal,  employs  the  following  words :  8 
"  As  I  have  already  observed,  the  criticisms  of  the  Historical  school 
have  not  led  so  far  to  the  creation  of  a  new  political  economy 

1  Theory  of  Political  Economy \  preface  to  the  second  edition,  1879. 

1  Schmoller's  Jahrbuck  contains  descriptive  studies  of  present-day  commercial 
and  industrial  undertakings  which  are  veritable  models. 

3  The  Present  Position  of  Political  Economy,  in  the  Economic  Journal,  1907, 
p.  481. 


STATE  SOCIALISM  407 

on  historical  lines  :  even  in  Germany  it  is  only  within  very  recent 
years  that  some  of  the  larger  outlines  of  such  an  economics 
have  begun  to  loom  up  before  us  in  the  great  treatise  of  Gustav 
Schmoller." 

In  view  of  considerations  like  these  one  might  have  expected 
that  the  Historical  school  would  have  shown  greater  indulgence  to 
the  attempts  made  both  by  the  Classical  and  by  the  Hedonistic 
schools  to  give  by  a  different  method  expression  to  the  same  instinc- 
tive desire  to  simplify  matters  in  order  to  understand  them  better. 1 


CHAPTER  II:   STATE  SOCIALISM 

THE  nineteenth  century  opened  with  a  feeling  of  contempt  for 
government  of  every  kind,  and  with  unbounded  confidence  on  the 
part  of  at  least  every  publicist  in  the  virtue  of  economic  liberty 
and  individual  initiative.  It  closed  amid  the  clamour  for  State 
intervention  in  all  matters  affecting  economic  or  social  organisation. 
In  every  country  the  number  of  public  men  and  of  economists  who 
favour  an  extension  of  the  economic  function  of  government  is 
continually  growing,  and  to-day  such  men  are  certainly  in  the 
majority.  To  some  writers  this  change  of  opinion  has  seemed 
sufficiently  important  to  warrant  special  treatment  as  a  new  doctrine, 
variously  known  as  State  Socialism  or  "  the  Socialism  of  the  Chair  " 
in  Germany  and  Interventionism  in  France. 

Really  it  is  not  an  economic  question  at  all,  but  a  question  of 
practical  politics  upon  which  writers  of  various  shades  of  economic 

1  We  have  not  the  necessary  space  in  this  volume  to  refer  to  the  history  of 
statistics.  This  science,  though  independent  of  political  economy,  is,  however, 
such  a  powerful  auxiliary  that  its  progress  has  to  some  extent  been  parallel 
with  the  growth  of  economics.  During  the  last  twenty  years  the  methods  of 
interpreting  statistics  (we  are  speaking  merely  of  observation)  have  been  very 
considerably  improved.  The  logical  problems  involved  have  been  studied  with 
much  care,  and  the  application  of  mathematics  to  these  problems  has  proved 
very  fruitful.  No  student  of  the  social  sciences  can  afford  to  neglect  such 
mathematical  theories  as  those  of  combination,  correlation,  degree  of  error,  etc. 
The  history  of  statistics,  which  contains  many  eminent  names,  from  Quetelet 
to  Karl  Pearson,  would  certainly  deserve  a  chapter  in  a  book  dealing  with  method, 
although  there  would  be  some  risk  of  giving  it  too  statistical  a  bias.  We  must 
rest  content  with  referring  the  reader  to  Udny  Yule's  Introduction  to  the  Theory  of 
Statistics,  which  constitutes  what  is  perhaps  the  best  recent  introduction  to  the 
discussion  concerning  the  method  to  be  employed  in  this  social  science,  and  forms 
an  indispensable  complement  to  the  study  of  the  problems  examined  in  thi« 
chapter. 


408  STATE  SOCIALISM 

opinion  may  agree  despite  extreme  differences  in  their  theoretical 
preconceptions.  The  problem  of  defining  the  limits  of  govern- 
mental action  in  the  matter  of  producing  and  distributing  wealth  is 
one  of  the  most  important  in  the  whole  realm  of  political  economy, 
but  it  can  hardly  be  considered  a  fundamental  scientific  question 
upon  which  economic  opinion  is  hopelessly  divided.  It  is  clear 
that  the  solution  of  the  problem  must  depend  not  merely  upon 
purely  economic  factors,  but  also  on  social  and  political  considera- 
tions, upon  the  peculiar  conception  of  general  interest  which  the 
individual  has  formed  for  himself  and  the  amount  of  confidence 
which  he  can  place  in  the  character  and  ability  of  Governments.1 
The  problem  is  always  changing,  and  whenever  a  new  kind  of 
society  is  created  or  a  new  Government  is  established  a  fresh  solution 
is  required  to  meet  the  changed  conditions. 

How  is  it,  then,  that  this  question  has  assumed  such  extravagant 
proportions  at  certain  periods  of  our  history  ? 

Had  the  issue  been  confined  to  the  limits  laid  down  by  Smith 
it  is  probable  that  such  passionate  controversies  would  have  been 
avoided.  Smith's  arguments  in  favour  of  laissez-faire  were  largely 
economic.  Gradually,  however,  under  the  growing  influence  of 
individual  and  political  liberty,  a  kind  of  contempt  for  all  State 
action  took  the  place  of  the  more  careful  reasoning  of  the  earlier 
theory,  and  the  superiority  of  individual  action  in  matters  non- 
economic  became  an  accepted  axiom  with  every  publicist. 

This  method  of  looking  at  the  problem  is  very  characteristic  of 
Bastiat.  The  one  feature  of  government  that  interested  him  was 
not  the  fact  that  it  represented  the  general  interest  of  the  citizens, 
but  that  whenever  it  took  any  action  it  had  to  employ  force,2 
whereas  individual  action  is  always  free.  Every  substitution  of 
State  for  individual  action  meant  victory  for  force  and  the  defeat 
of  liberty.  Such  substitution  must  consequently  be  condemned. 
Smith's  point  of  view  is  totally  different.  To  appreciate  this  differ- 
ence we  need  only  compare  their  treatment  of  State  action.  In 

1  Dupont-White  makes  the  remark  somewhere  that  the  State,  strictly  speak- 
ing, has  only  existed  since  1789.  It  appears,  then,  that  a  State  which  is  not 
constitutional,  democratic,  and  liberal  has  none  of  the  virtues  of  the  true  State, 
Such  exclusion,  although  permissible  in  the  publicist,  is  indefensible  in  the  theorist 
or  historian. 

*  "  The  distinctive  character  of  the  State  merely  consists  in  this  necessity  to 
have  recourse  to  force,  which  also  helps  to  indicate  the  extent  and  the  proper 
limits  of  its  action.  Government  is  only  possible  through  the  intervention  of 
force,  and  its  action  is  only  legitimate  when  the  intervention  of  force  can  be 
unown  to  be  justifiable."  (Harmonies,  10th  ed.,  pp.  552-553.) 


STATE  SOCIALISM  409 

addition  to  protecting  the  citizens  from  invasion  and  from  inter- 
ference with  their  individual  rights,  Smith  adds  that  the  sovereign 
should  undertake  "  the  duty  of  erecting  and  maintaining  certain 
public  works  and  certain  public  institutions,  which  it  can  never  be 
for  the  interest  of  any  individual,  or  small  number  of  individuals, 
to  erect  and  maintain ;  because  the  profit  could  never  repay  the 
expense  to  any  individual  or  small  number  of  individuals,  though  it 
may  frequently  do  much  more  than  repay  it  to  a  great  society."  l 
The  scope  is  sufficiently  wide,  at  any  rate.  If  we  turn  to  Bastiat,  on 
the  other  hand,  we  find  that  the  Government  has  only  two  functions 
to  perform,  namely,  "  to  guard  public  security  and  to  administer 
the  common  land."  2  Viewed  in  this  light,  the  problem  of  govern- 
mental intervention,  instead  of  remaining  purely  economic,  becomes 
a  question  of  determining  the  nature,  aims,  and  functions  of  the 
State,  and  individual  temperament  and  social  traditions  play  a 
much  more  important  part  than  either  the  operation  of  economic 
phenomena  or  any  amount  of  economic  reasoning.  It  is  not  sur- 
prising that  some  writers  thought  that  the  one  aim  of  economics 
was  to  defend  the  liberty  and  the  rights  of  the  individual ! 

Such  exaggerated  views  were  bound  to  beget  a  reaction,  and  the 
defence  of  State  action  assumes  equally  absurd  proportions  with 
some  of  the  writers  of  the  opposite  school.  Even  as  far  back  as 
1856  Dupont-White,  a  French  writer,  had  uttered  a  protest  against 
this  persistent  depreciation  of  the  State,  in  a  short  work  entitled 
Ulndlvidu  et  Vfilat.  His  ideas  are  so  closely  akin  to  those  of  the 
German  State  Socialists  that  they  have  often  been  confused  with 
them,  and  it  is  simpler  to  give  an  exposition  of  both  at  the  same 
time.  But  he  was  a  voice  crying  in  the  wilderness.  Public  opinion 
under  the  Second  Empire  was  very  little  disposed  to  listen  to  an 
individual  who,  though  a  Liberal  in  politics,  was  yet  anxious  to 
strengthen  the  power  and  to  add  to  the  econpmic  prerogative  of 
the  Crown.  More  favourable  circumstances  were  necessary  if  there 
was  to  be  a  change  of  public  opinion  on  the  matter.  The  times 
had  ripened  by  the  last  quarter  of  the  century,  and  the  elements 
proved  propitious,  especially  in  Germany,  where  the  reaction  first 
showed  itself. 

The  reaction  took  the  form  not  so  much  of  the  creation  of  a 
new  doctrine  as  of  a  fusion  of  two  older  currents,  which  must  first 
be  examined. 

During  the  course  of  the  nineteenth  century  we  find  a  number 

1  Wealth  of  Nations,  Book  IV,  chap.  9  ;  Carman's  ed.,  vol.  ii,  p.  185. 
8  Harmonies,  10th  ed.,  p.  656. 

B.D.  O 


410  STATE  SOCIALISM 

of  economists  who,  while  accepting  Smith's  fundamental  conception, 
gradually  limit  the  application  of  his  principle  of  laissez-faire.  They 
thought  that  the  superiority  of  laissez-faire  could  not  be  scientifically 
demonstrated  and  that  in  the  great  majority  of  cases  some  form 
of  State  intervention  was  necessary. 

On  the  other  hand,  we  meet  with  a  number  of  socialists  who 
prove  themselves  to  be  more  opportunistic  than  their  comrades,  and 
though  equally  hostile  to  private  property  and  freedom  of  produc- 
tion, yet  never  hesitate  to  address  their  appeals  on  behalf  of  the 
workers  to  existing  Governments. 

State  Socialism  represents  the  fusion  of  these  two  currents.  It 
surpasses  the  one  in  its  faith  in  the  wisdom  of  Governments,  and  is 
distinguished  from  the  other  by  its  greater  attachment  to  the 
rights  of  private  property ;  but  both  of  them  contribute  some  items 
to  its  programme.  In  the  first  place  we  must  try  to  discover  the 
source  of  these  separate  tendencies,  and  in  the  second  place  watch 
their  amalgamation. 


I :  THE  ECONOMISTS'  CRITICISM  OF  LAISSEZ-FAIRE 

THE  doctrine  of  absolute  laissez-faire  was  not  long  allowed  to  go 
unchallenged.  From  the  time  of  Smith  onward  there  is  an  un- 
interrupted sequence  of  writers — all  of  them  by  no  means  socialists 
— who  ventured  to  attack  the  fundamental  propositions  of  the  great 
Scotsman  and  who  attempted  to  show  that  his  practical  conclusions 
were  not  always  borne  out  by  the  facts. 

Smith  based  his  advocacy  of  laissez-faire  upon  the  supposed 
identification  of  public  and  private  interests.  He  showed  how 
competition  reduced  prices  to  the  level  of  cost  of  production,  how 
supply  adapted  itself  to  meet  demand  in  a  perfectly  automatic 
fashion,  and  how  capital  in  an  equally  natural  way  flowed  into  the 
most  remunerative  occupations. 

This  principle  of  identity  of  interests  was,  however,  rudely 
shaken  by  the  teachings  of  Malthus  and  Ricardo,  although  both  of 
them  remained  strong  adherents  of  the  doctrine  of  individual  liberty. 

Sismondi,  who  was  the  next  to  intervene,  laid  stress  upon  the 
evils  of  competition,  and  showed  how  social  inequality  necessitated 
the  submission  of  the  weak  to  the  will  of  the  strong.  His  whole 
book  was  simply  a  refutation  of  Smith's  providential  optimism. 

In  Germany  even,  as  early  as  1832,  that  brilliant  economist 
Hermann  was  already  proceeding  with  his  critical  analysis  of  the 
Classical  theories;  and  after  demonstrating  how  frequently  indi- 


THE  ECONOMISTS'  CRITICISM  OF  LAISSEZ-FAIRE  411 

vidual  interest  comes  into  conflict  with  public  welfare,  and  how 
inadequate  is  the  contribution  which  it  can  possibly  make  to  the 
general  well-being,  he  declares  his  inability  to  subscribe  to  the 
doctrine  laid  down  by  most  of  Smith's  followers,  namely,  that 
individual  activity  moved  by  personal  interest  is  sufficient  to  meet 
all  the  demands  of  national  economy.  Within  the  bounds  of  this 
national  economy  l  he  thinks  there  ought  to  be  room  for  what  he 
calls  the  civic  spirit  (Gemeinsinn)  as  well. 

The  next  critic,  List,  bases  his  whole  case  upon  the  opposition 
between  immediate  interests,  which  guide  the  individual,  and  the 
permanent  interests  of  the  nation,  of  which  the  Government  alone 
can  take  account. 

Stuart  Mill,  in  the  famous  fifth  book  of  the  Principles,  refuses 
even  to  discuss  the  doctrine  of  identity  of  interests,  believing 
it  to  be  quite  untenable.  On  the  question  of  non-intervention 
he  admits  the  validity  of  one  economic  argument  only,  namely, 
the  superiority  of  self-interest  as  an  economic  motive.  But  he 
is  quick  to  recognise  its  shortcomings  and  the  exceptions  to  its 
universal  operation — in  the  natural  incapacity  of  children  and 
of  the  weak-minded,  the  ignorance  of  consumers,  the  difficulty 
of  achieving  it,  even  when  clearly  perceived,  without  the  help 
of  society  as  a  whole,  as  in  the  case  of  the  Factory  Acts.  Mill 
also  points  out  how  this  motive  is  frequently  wanting  in  modern 
industrial  organisation,  where,  for  example,  we  have  joint  stock 
companies  acting  through  the  medium  of  a  paid  agency,  or  charitable 
work  undertaken  by  an  individual  who  has  to  consider,  not  his  own 
interests,  but  those  of  other  people.  Private  interest  is  also  fre- 
quently antagonistic  to  public  interest,  as  in  the  case  of  the  public 
supply  of  gas  or  water,  where  the  individual  entrepreneur  is  influenced 
by  the  thought  of  a  maximum  profit  rather  than  by  considerations 
of  general  interest.  In  matters  of  that  kind  Stuart  Mill  was  inclined 
to  favour  State  intervention.8 

M.  Chevalier,  from  his  professorial  chair  in  the  College  de  France, 

1  Hermann,  Staatsurirtschaftliche  Unterauchungen,  1st  ed.,  pp.  12-18. 

2  A  similar  idea  is  contained  in  Liberty,  where  it  is  stated  that  "  trade  is  a 
social  act,"  that  the  conduct  of  every  merchant  "comes  within  the  jurisdiction  of 
Bociety,"  and  that  "  as  the  principle  of  individual  liberty  is  not  involved  in  the 
doctrine  of  Free  Trade,  so  neither  is  it  in  most  of   the  questions  which  arise 
respecting  the  limits  of  that  doctrine  ;  as,  for  example,  what  amount  of  public 
control  is  admissible  for  the  prevention  of  fraud  by  adulteration  ;  how  far  sani- 
tary precautions,  or  arrangements  to  protect  workpeople  employed  in  dangerous 
occupations,  should  be  enforced  on  employers.  .  .  .  But  that  they  [people]  may 
be  legitimately  controlled  for  these  ends  is  in  principle  undeniable."    (Chap.  5.) 


412  STATE  SOCIALISM 

extended  his  congratulations  to  Mill  upon  his  successful  restoration 
of  the  legitimate  duties  of  Governments.1  Chevalier  thought  that 
those  who  believed  that  the  economic  order  could  be  set  up  simply 
by  the  aid  of  competition  acting  through  personal  interest  were 
either  illogical  in  their  arguments  or  irrational  in  their  aims. 
Government  was  simply  the  manager  of  the  national  organisation, 
and  its  duty  was  to  intervene  whenever  the  general  interest  was 
endangered.  But  the  duties  and  privileges  of  government  are  not 
exactly  those  of  the  village  policeman.2  Applying  this  principle  to 
public  works,  he  points  out  that  they  are  more  or  less  State  matters, 
and  the  guarantee  for  good  work  is  quite  as  great  when  the  State 
itself  undertakes  to  perform  it  as  when  it  is  entrusted  to  a  private 
individual. 

In  1863  Cournot,  whose  reputation  was  unequal  to  either  Mill's 
or  Chevalier's,  but  whose  penetrating  thought,  despite  its  small 
immediate  influence,  is  quite  important  in  the  history  of  economic 
doctrines,  treats  of  the  same  problem  in  his  Principes  de  la  Thlorie 
des  Richesses.  Going  straight  to  the  heart  of  the  problem,  he  asks 
whether  it  is  possible  to  give  a  clear  definition  of  this  general  interest 
• — the  economic  optimum  which  we  are  anxious  to  realise — and 
whether  the  system  of  free  competition  is  clearly  superior  to  every 
other.  He  justly  remarks  that  the  problem  is  insoluble.  Pro- 
duction is  determined  by  demand,  which  depends  both  upon  the 
preliminary  distribution  of  wealth  and  also  upon  the  tastes  of 
consumers.  But  if  this  be  the  case,  it  is  impossible  to  outline  an 
ideal  system  of  distribution  or  to  fix  upon  the  kind  of  tastes  that 
will  prove  most  favourable  for  the  development  of  society.  A  step 
farther  and  Cournot  must  have  hit  upon  the  distinction  so  neatly 
made  by  Pareto  between  maximum  utility,  which  is  a  variable, 
undefined  notion,  and  maximum  ophelimity,  "  the  investigation 
of  which  constitutes  a  clearly  defined  problem  wholly  within  the 
realm  of  economics."  8 

But  Cournot  does  not  therefore  conclude  that  we  ought  to 
abstain  from  passing  any  judgment  in  the  realm  of  political  economy 
and  abandon  all  thought  of  social  amelioration.  Though  the 
absolutely  best  cannot  be  denned,  it  does  not  follow  that  we  cannot 
determine  the  relatively  good.  "  Improvement  or  amelioration  is 
possible,"  says  he,  "  by  introducing  a  change  which  operates  upon 
one  part  of  the  economic  system,  provided  there  are  no  indirect 

1  Michel  Chevalier,  Introductory  Lectures,  No.  10,  in  Cours,  vol.  i,  p.  221. 

•  Cours,  vol.  i,  pp.  211,  214  ;  vol.  ii,  pp.  38,  115. 

»  Pareto,  Cours  d' Economic  politique,  vol.  ii,  §  656  (1897). 


THE  ECONOMISTS'  CRITICISM  OF  LAISSEZ-FAIRE    413 

effects  which  damage  the  other  parts  of  the  system." l  Such 
progress  is  not  necessarily  the  result  of  private  effort.  Following 
Sismondi,  he  quotes  several  instances  in  which  the  interests  of  the 
individual  collide  with  those  of  the  public  and  in  which  State  inter- 
vention might  prove  useful. 

Every  one  of  these  authors — in  varying  degrees,  of  course — admits 
the  legitimacy  of  State  intervention  in  matters  economic.  Liberty 
doubtless  is  still  the  fundamental  principle.  Sismondi  was  content 
with  mere  aspiration,  so  great  did  the  difficulties  of  interven- 
tion appear  to  him.  Stuart  Mill  thought  that  the  amis  probandi 
should  rest  with  the  innovator.  Cournot  considered  liberty  as 
being  still  the  most  natural  and  simple  method,  and  should  the 
State  find  it  necessary  to  intervene  it  could  only  be  in  those  instances 
in  which  science  has  clearly  defined  the  aim  in  view  and  demonstrated 
the  efficacy  of  the  methods  proposed.  Every  one  of  them  has 
abandoned  liberty  as  a  scientific  principle.  To  Cournot  it  was  an 
axiom  of  practical  wisdom ; a  Stuart  Mill  upheld  it  for  political 
reasons  as  providing  the  best  method  of  developing  initiative  and 
responsibility  among  the  citizens.  They  all  agree  that  the  State, 
far  from  being  a  pis  alter,  has  a  legitimate  sphere  of  action.  The 
difficulty  is  just  to  define  this.3  This  was  the  task  to  which  Walras 
addressed  himself  with  remarkable  success  in  his  lectures  on  the 
theory  of  the  State,  delivered  in  Paris  in  1867-68.* 

And  so  we  find  that  the  progress  of  thought  since  the  days  of 
Adam  Smith  had  led  to  important  modifications  of  the  old  doctrines 
concerning  the  economic  functions  of  the  State.  The  publicists, 
however,  were  not  immediately  converted.  Even  when  the  century 
was  waning  they  still  remained  faithful  to  the  optimistic  indivi- 
dualism of  the  earlier  period.  The  organon  of  State  Socialism  merely 
consists  of  these  analyses  incorporated  into  a  system.  The  authors 
just  mentioned  must  consequently  be  regarded,  if  not  as  the  pre- 
cursors of  State  Socialism,  at  any  rate  as  unconsciously  contributing 
to  the  theory. 

1  Principea,  p.  422. 

1  Ibid.,  pp.  444, 462,  521. 

»  Stuart  Mill  has  tried  to  do  so  in  a  formula  that  is  not  very  illuminating : 
"  To  individuality  should  belong  the  part  of  life  in  which  it  is  chiefly  the  indi- 
vidual that  is  interested;  to  society,  the  part  which  chiefly  interests  society." 
(Liberty,  chap.  4.) 

4  Republished  in  hta  Etude*  d'Economie  sociale,  1896.  See  a  brief  rlsumi 
in  our  chapter  on  Rent. 


414  STATE  SOCIALISM 

II :  THE  SOCIALISTIC  ORIGIN  OF  STATE  SOCIALISM. 
RODBERTUS  AND  LASSALLE 

STATE  Socialism  is  not  an  economic  doctrine  merely.  It  has  a 
social  and  moral  basis,  and  is  built  upon  a  certain  ideal  of  justice 
and  a  particular  conception  of  the  function  of  society  and  of  the 
State.  This  ideal  and  this  conception  it  received,  not  from  the 
economists,  but  from  the  Socialists,  especially  Rodbertus  and 
Lassalle.  The  aim  of  these  two  writers  was  to  effect  a  kind  of 
compromise  between  the  society  of  the  present  and  that  of  the 
future,  using  the  powers  of  the  modern  State  simply  as  a  lever. 

The  idea  of  a  compromise  of  this  kind  was  not  altogether  new. 
A  faint  suggestion  of  it  may  be  detected  more  than  once  in  the  course 
of  the  century,  and  an  experiment  of  the  kind  was  mooted  in  France 
towards  the  end  of  the  July  Monarchy.  At  that  time  we  find  men 
like  Louis  Blanc  and  Vidal — who  were  at  least  socialists  in  their 
general  outlook — writing  to  demand  State  intervention  not  merely 
with  a  view  to  repairing  the  injustice  of  the  present  society,  but  also 
with  a  view  to  preparation  for  the  society  of  the  future  with  as  little 
break  with  the  past  as  possible.  Louis  Blanc  was  in  this  sense  the  first 
to  anticipate  the  programme  of  the  State  Socialists.  But  its  more 
immediate  inspirers  were  Rodbertus  and  Lassalle,  both  of  whom 
belonged  to  that  country  in  which  its  effects  were  most  clearly  seen. 

Their  influence  upon  German  State  Socialism  cannot  be  exactly 
measured  by  the  amount  of  direct  borrowing  that  took  place.  They 
were  linked  by  ties  of  closest  friendship  to  the  men  who  were 
responsible  for  creating  and  popularising  the  new  ideas,  and  it  is 
important  that  we  should  appreciate  the  personal  influence  which 
they  wielded.  Rodbertus  formed  the  centre  of  the  group,  and 
during  the  two  years  1862-64  he  carried  on  an  active  correspond- 
ence with  Lassalle.  They  were  brought  together  by  the  good 
offices  of  a  common  friend,  Lothar  Bucher,  an  old  democrat  of  1848 
who  had  succeeded  in  becoming  the  confidant  of  Bismarck.  Strangely 
enough,  Bismarck  kept  up  his  friendship  with  Lassalle  even  when 
the  latter  was  most  busily  engaged  with  his  propaganda  work.1 
Wagner,  also,  the  most  eminent  representative  of  State  Socialism, 
was  in  frequent  communication  with  Rodbertus,  and  he  never 
failed  to  recognise  his  great  indebtedness  to  him.  Wagner  himself 
was  on  more  than  one  occasion  consulted  by  Bismarck. 

But  apart  altogether  from  their  connection  with  State  Socialism, 

1  For  a  general  account  of  Lassalle 's  life,  and  especially  his  relations  with 
Bismarck,  see  Hermann  Oncken,  Laasatte  (Stuttgart,  1904). 


RODBERTUS  415 

Rodbertus  and  Lassalle  would  deserve  a  place  in  our  history. 
Rodbertus  is  a  theoretical  writer  of  considerable  vigour  and 
eloquence,  and  his  thoughts  are  extraordinarily  suggestive.  Lassalle 
was  an  agitator  and  propagandist  rather  than  an  original  thinker, 
but  he  has  left  a  lasting  impression  upon  the  German  labour  move- 
ment. Hence  our  determination  to  give  a  somewhat  detailed 
exposition  of  their  work,  especially  of  that  of  Rodbertus,  and  to 
spare  no  effort  in  trying  to  realise  the  importance  of  the  contri- 
bution made  by  both  of  them, 

1.  RODBERTUS 

In  a  history  of  doctrines  Rodbertus  has  a  place  peculiarly  his 
own.  He  forms,  as  it  were,  a  channel  through  which  the  ideas 
first  preached  by  Sismondi  and  the  Saint-Simonians  were  transmitted 
to  the  writers  who  belong  to  the  last  quarter  of  the  century.  His 
intellectual  horizon — largely  determined  for  him  by  his  knowledge  of 
these  French  sources  l — was  fixed  as  early  as  1837,  when  he  produced 
his  Forderungen,  which  the  Gazette  universelle  d' 'Augsburg  refused  to 
publish.  His  first  work  appeared  in  1842,2  and  the  earliest  of  the 
Soziale  Brief e  3  belong  to  1850  and  1851.  At  the  time  these  passed 

1  There  has  been  no  dispute  concerning  the  French  origin  of  Rodbertus 's  ideas 
since  the  evidence  was  sifted  byMengerin  his  Das  Recht  auf  den  vollen  Arbeiteer* 
trag  (1st  ed.,  1886).  ButMenger  only  mentions  two  sourcesof  inspiration,  Proudhon 
and  the  Saint-Simonians.  The  text  will  sufficiently  indicate  his  indebtedness 
to  the  Saint-Simonians,  but  we  think  that  Sismondi  might  well  have  been  sub- 
stituted for  Proudhon.  The  only  Proudhonian  doctrine  that  is  discoverable  in 
Rodbertus  is  the  theory  concerning  the  constitution  of  value.  But  in  the  second  of 
the  Soziale  Briefe  (Schriften,  vol.  ii,  p.  46,  note)  he  states  definitely  that  the  idea 
was  not  a  borrowed  one,  and  that  he  himself  was  the  first  to  formulate  it,  although 
he  omits  to  state  in  what  connection.  He  may  be  referring  to  a  passage  in  his 
Forderungen,  where  the  idea  is  quite  clearly  expressed.  Speaking  of  Ricardo's 
theory  of  value,  he  says  :  "  That  theory  comes  to  grief  on  a  single  issue,  namely, 
in  regarding  a  thing  as  existing  when  it  only  exists  in  the  mind,  and  treating  a 
thing  as  a  reality  when  it  only  becomes  real  in  the  future."  (Schriften,  vol.  iii, 
p.  120.)  It  is  clearly  pointed  out  that  the  task  of  the  future  is  to  determine 
what  value  is.  The  Forderungen,  where  all  the  master  ideas  of  Rodbertus  may 
be  studied,  was  published  in  1837,  nine  years  before  the  Contradictions  iconomiquet 
was  published  by  Proudhon,  who  made  his  first  reference  to  the  question  in  that 
work. 

a  Zur  Erkenntnisa  unserer  staatswirtschaftlichen  Zustdnde  (New  Brandenburg, 
1842).  The  work  was  to  consist  of  three  parts,  only  the  first  of  which  was 
published,  and  that  has  not  been  reissued  since. 

3  The  first  three  Soziale  Briefe,  as  well  as  the  Forderungen,  have  been 
republished  in  Schriften  von  Dr.  Karl  Rodbertus-Jagetaow  (Berlin,  1899, 
3  vols.).  This  is  the  edition  we  quote.  Tli«  fourth  Brief,  entitled  Dot 
Kapital,  was  written  in  1852,  but  was  not  published  until  after  Rodbertua'i 
death.  It  was  translated  into  French  in  1904  by  M.  Chatelain,  and  published  by 


416  STATE  SOCIALISM 

almost  unnoticed.  It  was  only  when  Lassalle  in  his  treatise  in 
1862  referred  to  him  as  the  greatest  of  German  economists,  and 
when  conservative  writers  like  Rudolf  Meyer  and  Wagner  drew 
attention  to  his  work,  that  his  books  received  the  notice  which 
they  deserved.  The  German  economists  of  the  last  thirty  years 
have  been  greatly  influenced  by  him.  His  ideas,  it  is  true,  are 
largely  those  of  the  earliest  French  socialists,  who  wrote  before 
the  movement  had  lost  its  purely  intellectual  tone  and  become 
involved  in  the  struggle  of  the  July  Monarchy,  but  his  clear  logic 
and  his  systematic  method,  coupled  with  his  knowledge  of  economics, 
which  is  in  every  way  superior  to  that  of  his  predecessors,  gives  to 
these  ideas  a  degree  of  permanence  which  they  had  never  enjoyed 
before.  This  "  Ricardo  of  socialism,"  as  Wagner1  calls  him,  did 
for  his  predecessors'  doctrines  what  Ricardo  had  succeeded  in  doing 
for  those  of  Malthus  and  Smith.  He  magnified  the  good  results  of 
their  work  and  emphasised  their  fundamental  postulates. 

Rodbertus's  upbringing  decreed  that  he  should  not  become 
involved  in  that  democratic  and  radical  socialism  which  was 
begotten  of  popular  agitation,  and  whose  best-known  representative 
is  Marx.  Marx  considered  socialism  and  revolution,  economic 
theory  and  political  action,  as  being  indissolubly  one.2  Rodbertus, 
on  the  other  hand,  was  a  great  liberal  landowner  who  sat  on  the 
Left  Centre  in  the  Prussian  National  Assembly  of  1848,  and  his 
political  faith  is  summed  up  in  the  two  phrases  "  constitutional 
government  "  and  "  national  unity."  3  The  success  won  by  the  Bis- 
marckian  policy  gradually  drew  him  nearer  the  monarchy,  especially 
towards  the  end  of  his  life.4  His  ideal  was  a  socialist  party  re- 
Messrs.  Giard  and  Briere.  Our  references  in  the  succeeding  pages  are  to  thia 
edition.  Two  other  articles  written  by  Rodbarlus  have  been  published,  one 
by  R.  Meyer  under  the  title  Briefe  u.  Sozialpolitische  Aufs&lze  (Berlin,  1882), 
the  other  by  Moritz  Wirth  undes  the  title  of  Kleine  Schriften  (Berlin,  1890). 
For  a  complete  bibliography  of  Rodbertus's  work  see  Andler's  Le,  Socialisms 
cTfitat  en  Attemagne  (Paris,  1897).  Professor  Conner  has  written  an  illuminating 
study  of  his  political  philosophy. 

1  In  his  introduction  to  the  Briefe  von  Lassalle  an  Rodbertiis,  p.  8  (Berlin,  1878). 

*  On  the  other  hand,  as  Menger  shows,  the  sources  of  Marx's  theory  are  English 
rather  than  French — another  point  of  difference  between  the  two  socialists. 

*  He  was  for  a  short  time  Minister  of  Public  Worship.     Appointed  on 
July  4,  he  resigned  at  the  end  of  a  fortnight  because  his  colleagues  refused  to 
recognise  quite  as  fully  as  he  wished  the  rights  of  the  Parliament  of  Frankfort. 

*  A  characteristic  sign  of  this  evolution  is  the  substitution  throughout  the 
second  edition  of  the  Sociale  Briefe  of  the  word  Staaitwiilz  ("  the  will  of  the 
State")  for  the  word  Volksunlle  ("the  people's  will*').    This  second  edition, 
comprising  the  second  and  third  letters,  was  published  by  him  in  1875  under 
the  title  Zur  Beleuchiung  dtr  sozialen  Frage. 


RODBERTUS  417 

nouncing  all  political  action  and  confining  its  attention  solely  to 
social  questions.  Although  personally  favourably  inclined  towards 
universal  suffrage,  he  refused  to  join  Lassalle's  Arbeiterverein 
because  Lassalle  had  insisted  upon  placing  this  article  of  political 
reform  on  his  programme.1  The  party  of  the  future,  he  thought, 
would  be  at  once  monarchical,  national,  and  socialistic,  or  at  any 
rate  conservative  and  socialistic.2  At  the  same  time  we  must 
remember  that  "  in  so  far  as  the  Social  Democratic  party  was  aiming 
at  economic  reforms  he  was  with  it  heart  and  soul."  3 

Despite  his  belief  in  the  possibility  of  reconciling  the  monarchical 
policy  with  his  socialistic  programme,  he  carefully  avoided  the 
economic  teachings  of  the  socialists.  His  too  logical  mind  could 
never  appreciate  their  position,  and  he  had  the  greatest  contempt 
for  the  Socialists  of  the  Chair.  He  would  be  the  first  to  admit  that 
in  practice  socialism  must  content  itself  with  temporary  expedients, 
although  he  cannot  bring  himself  to  believe  that  such  compromise 
constitutes  the  whole  of  the  socialistic  doctrine.  He  refers  to  the 
Socialists  of  the  Chair  as  the  "  sweetened  water  thinkers,"  *  and  he 
refused  to  join  them  at  the  Eisenach  Congress  of  1872 — the  "  bog 
of  Eisenach,"  as  he  calls  it  somewhere.  He  regarded  the  whole 
thing  as  a  first-class  comedy.  Even  labour  legislation,  he  thought, 
was  merely  a  caprice  of  the  humanitarians  and  socialists.5  So 
that  whenever  we  find  him  summing  up  his  programme  in  some 
such  sonorous  phrase  as  Stoat  gegen  Staatslosigkeit •  ("the  State  as 
against  the  No-State")  we  must  be  careful  to  distinguish  it  from  the 
hazy  doctrines  of  the  State  Socialists.7  Despite  himself,  however, 
he  proved  one  of  the  most  influential  precursors  of  the  school, 
and  therein  lies  his  real  significance. 

Rodbertus's  whole  theory  rests  upon  the  conception  of  society  as 

1  Letter  to  R.  Meyer,  November  29,  1871.  This  point  of  view  ia  developed  at 
length  in  his  "  Open  Letter  to  the  Committee  of  the  Association  of  German  Work- 
men at  Leipzig,"  April  10, 1863,  published  by  Moritz  Wirth  in  the  Kleine  Schriften. 

a  Letter  to  R.  Meyer,  March  12,  1872.  d  the  letters  of  January  23  and 
February  3,  1871. 

1  Ibid.,  November  30,  1871.  In  1874  he  proposes  to  offer  himself  as  a 
socialist  candidate  for  the  Reichstag,  but  recognises  that  the  State  must  first  of 
all  be  strengthened  on  the  military  side  as  well  as  on  the  religious. 

•  Ibid.,  October  17,  1872.  *  Ibid.,  January  6,  1873. 

•  Ibid.,  March  10,  1872,  and  Phyaiokratie  u.  Anthropokratie,  in  Briefe  u. 
Sozialpolitische  Aufsdtze,  pp.  521,  522. 

7  He  protests  vigorously  against  the  title  of  Katheder  Sozialist  in  a  letter 
of  August  26,  1872.  A  vigorous  criticism  of  the  Socialism  of  the  Chair,  written  in 
a  private  letter  of  Rodbertus,  is  quoted  at  length  by  Rudolf  Meyer-in  his  Eman- 
dpationskampf  dea  Men  Slcmdea,  pp.  60-63  (Berlin,  1874), 


418  STATE  SOCIALISM 

an  organism  created  by  division  of  labour.  Adam  Smith,  as  he  points 
out,  had  caught  a  faint  glimmer  of  the  significant  fact  that  all  men 
are  linked  together  by  an  inevitable  law  of  solidarity  which  takes 
them  out  of  their  isolation  and  transforms  an  aggregate  of  indivi- 
duals into  a  real  community  having  no  frontiers  and  no  limits  save 
such  as  division  of  labour  imposes,  and  sufficiently  wide  in  scope  to 
include  the  whole  universe.1  As  soon  as  an  individual  becomes  a 
part  of  economic  society  his  well-being  no  longer  depends  upon  him- 
self and  the  use  which  he  makes  of  the  natural  medium  to  which 
he  applies  himself,  but  upon  the  activity  of  his  fellow-producers. 
The  execution  of  certain  social  functions,  which  Rodbertus  enume- 
rates as  follows,  and  which  he  borrows  partly  from  Saint-Simon, 
henceforth  become  the  determining  factors  :  (1)  The  adaptation  of 
production  to  meet  demand;  (2)  the  maintenance  of  production 
at  least  up  to  the  standard  of  the  existing  resources ;  (3)  the  just 
distribution  of  the  common  produce  among  the  producers. 

Should  society  be  allowed  to  work  out  these  projects  spon- 
taneously, or  should  it  endeavour  to  carry  out  a  preconceived  plan  ? 
To  Rodbertus  this  was  the  great  problem  which  society  had  to 
consider.  The  economists  of  Smith's  school  treated  the  social 
organism  as  a  living  thing.  The  free  play  of  natural  laws  must  have 
the  same  beneficial  effects  upon  it  as  the  free  circulation  of  the 
blood  has  upon  the  human  body.  Every  social  function  would 
be  regularly  discharged  provided  "  liberty "  only  was  secured. 
Rodbertus  thought  this  was  a  mistake.  "  No  State,"  says  he,  "  is 
sufficiently  lucky  or  perhaps  unfortunate  enough  to  have  the  natural 
needs  of  the  community  satisfied  by  natural  law  without  any 
conscious  effort  on  the  part  of  anyone.  The  State  is  an  historical 
organism,  and  the  particular  kind  of  organisation  which  it  possesses 
must  be  determined  for  it  by  the  members  of  the  State  itself.  Each 
State  must  pass  its  own  laws  and  develop  its  own  organisation. 
The  organs  of  the  State  do  not  grow  up  spontaneously.  They  must 
be  fostered,  strengthened,  and  controlled  by  the  State."  •  Hence, 

1  "  Communion  or  community  of  labour  would  be  a  better  term  than  divi- 
sion of  labour  "  (Kqpital,  p.  74) ;  and  in  another  connection !  "  The  only  real 
division  of  labour  is  territorial  division  of  labour"  (ibid.).  Elsewhere  (p.  87) 
he  warns  his  readers  against  confusing  the  terms  "social"  and  "national." 
Adopting  the  Saint-Simonian  philosophy  of  history,  he  declares  history  to  be  a 
process  of  unification  which  brings  gradually  widening  circles  into  closer  unity 
with  one  another  (Zur  Qesfihichte  der  romischenTribwtsteuer,  in  the  Jahrbilcher  fur 
Nationafokonomit  «.  Statistik,  1865,  vol.  v,  p.  2).  "  The  course  of  history  is  just 
the  expansion  of  communism."  (KapitaJ,  p.  85,  note.) 

'  Physiokratie  u.  Anthropokratie,  in  Brief e  u.  Sozialpolititche  Aufsdtze,  p.  619. 


RODBERTUS  419 

after  1837  we  find  Rodbertus  proposing  the  substitution  of  a 
system  of  State  direction *  for  the  system  of  natural  liberty, 
and  his  whole  work  is  an  attempt  to  justify  the  introduction 
of  such  a  system.  Let  us  examine  his  thesis  and  review  the 
various  economic  functions  which  we  defined  above.  Let  us  also 
watch  their  operation  at  the  present  day  and  see  how  differently 
these  functions  would  be  discharged  in  a  better  organised  com- 
munity. 

1.  It  is  hardly  correct  to  speak  of  production  adapting  itself  to 
social  need  under  existing  conditions,  because  production  only 
adapts  itself  to  the  effective  demand,  i.e.  to  the  demand  when 
expressed  in  terms  of  money.  This  fact  had  been  hinted  at  by 
Smith,  and  Sismondi  had  laid  considerable  stress  upon  it;  but 
Rodbertus  was  the  earliest  to  point  out  that  this  really  meant  that 
only  those  people  who  already  possess  something  can  have  their 
wants  satisfied.2  Those  who  have  nothing  to  offer  except  their 
labour,  and  find  that  there  is  no  demand  for  that  labour,  have  no 
share  in  the  social  product.  On  the  other  hand,  the  individual  who 
draws  an  income,  even  though  he  never  did  any  work  for  it,  is  able 
to  make  effective  his  demand  for  the  objects  of  his  desire.  The 
result  is  that  many  of  the  more  necessitous  persons  must  needs  go 
unsatisfied,  while  others  wallow  in  luxury. 

Truer  word  was  never  spoken.  Rodbertus  had  a  perfect  right 
to  insist  on  the  fundamental  fallacy  lurking  within  a  system  which 
could  treat  unemployment — that  modern  form  of  famine — as  simply 
an  over-production  of  goods,  and  which  found  itself  unable  to 
modify  it  except  through  public  or  private  charity.  His  remedy 
consisted  of  a  proposal  to  set  up  production  for  social  need  as  a 
substitute  for  production  for  demand.  The  first  thing  to  be  done 
was  to  find  out  the  time  which  each  individual  would  be  willing  to 
give  to  productive  work,  making  a  note  of  the  character  and  quantity 
of  goods  required  at  the  same  time.8  He  thought  that  "  the  wants 
of  men  in  general  form  an  even  series,  and  that  the  kind  and 
number  of  objects  required  can  easily  be  calculated."  4  Knowing 
the  time  which  society  could  afford  to  give  to  production,  there 

1  Schriften,  vol.  iii,  p.  216. 

1  "  In  a  social  State  of  this  description  people  produce,  not  with  a  view  to 
satisfying  the  needs  of  labour,  but  the  needs  of  possession ;  in  other  words,  they 
produce  for  those  who  possess."  (Kapitdl,  p.  161.  Cf.  also  p.  51.) 

8  "  Provided  we  knew  the  time  that  a  person  could  afford  to  devote  to  the 
work  of  production,  we  could  easily  determine  the  quantity  that  would  b« 
sufficient  to  satisfy  the  needs  of  everybody."  (Kapital,  p.  109.) 

•  Ibid.,  p.  108. 


420  STATE  SOCIALISM 

would  be  no  great  difficulty  in  distributing  the  products  among  the 
various  producers. 

This  is  to  go  to  work  a  little  too  precipitately  and  to  shun  the 
greatest  difficulty  of  all.  The  uniform  series  of  wants  of  which 
Rodbertus  speaks  exist  only  in  the  imagination.  What  we  really 
find  is  a  small  number  of  collective  needs  combined  with  a  great 
variety  of  individual  needs.  Social  need  is  merely  a  vague  term 
used  to  designate  both  kinds  of  wants  at  once.  The  slightest 
reflection  shows  that  every  individual  possesses  quite  a  unique 
series  of  needs  and  tastes.  To  base  production  upon  social  need  is 
to  suppress  liberty  of  demand  and  consumption.  It  implies  the 
establishment  of  an  arbitrary  scale  of  needs  which  must  be  satisfied 
and  which  is  to  be  imposed  upon  every  individual.  The  remedy 
would  be  worse  than  the  evil. 

But  the  opposition  between  social  need  and  effective  demand 
by  no  means  disposes  of  his  argument.  The  opposition  needs  some 
proving,  and  some  explanation  of  the  producers'  preference  for 
demand  rather  than  need  ought  to  be  offered.  The  explanation 
must  be  sought  in  the  fact  that  the  capitalistic  producer  of  to-day 
manages  his  business  in  accordance  with  the  dictates  of  personal 
interest,  and  personal  interest  compels  him  to  apply  his  instruments 
to  produce  whatever  will  yield  him  the  largest  net  product.  He  is 
more  concerned  about  the  amount  of  profit  made  than  about  the 
amount  of  produce  raised.  He  produces,  not  with  a  view  to  satis- 
fying any  social  need,  but  simply  because  it  yields  him  rent  or 
profit.1 

This  contrast  between  profit-making  and  productivity  deserves 
some  attention.  Sismondi  had  already  called  attention  to  it  by 
distinguishing  between  the  net  and  the  gross  product.  A  number 
of  writers  have  treated  of  it  since,  and  it  holds  a  by  no  means 
insignificant  place  in  the  history  of  economic  doctrines.2 

1  Kajrital,  p.  143. 

1  The  question  of  the  net  and  gross  product  was  one  of  the  outstanding 
problems  of  this  period.  Vidal  (Repartition  des  Richesses,  p.  219,  Paris,  1846)  and 
Ott  (Traitt  d' Economic  sociale,  p.  95, 1851 )  lay  stress  upon  it.  Since  then  Cournot, 
Duhring,  and  more  recently  Effertz  and  Landry,  have  handled  the  problem  anew. 
But  each  of  them  when  he  comes  to  define  the  word  "  productivity  "  defines  it  in 
his  own  fashion,  so  that  they  do  not  really  discuss  the  same  question.  Rodbertus, 
as  we  shall  have  occasion  to  point  out  in  the  text,  uses  the  word  in  a  very  vague 
fashion  indeed,  but  still  it  is  the  basis  of  his  whole  discussion.  It  seems  to  us 
that  under  a  regime  of  division  of  labour  rentability  should  be  the  one  criterion. 
But  it  would  be  a  mistake  to  imagine  that  when  dwindling  profits  make  a  change 
in  the  methods  of  production  imperative,  that  change  will  be  welcomed  with 
equal  enthusiasm  by  everybody,  by  both  master  and  worker  alike, 


RODBERTUS  421 

The  opposition  is  dwelt  upon  in  no  equivocal  fashion  by 
Rodbertus.  This  pursuit  of  the  maximum  net  product  is  clearly 
the  producer's  only  guide,  but  the  conclusions  which  he  proceeds 
to  draw  from  it  are  somewhat  more  questionable.  If  we  accept 
his  opinion  that  the  satisfaction  of  social  need  and  not  of  individual 
demand  is  the  determining  factor  in  production,  we  are  driven  to 
the  conclusion  that  modern  society,  actuated  as  it  is  by  this  one 
motive,  cannot  possibly  satisfy  every  individual  demand.  But  we 
have  already  shown  that  the  phrase  "  social  need  "  has  no  precise 
connotation;  neither  has  the  term  "productivity,"  which  is  so 
intimately  connected  with  it.  Further,  if  society  has  no  desire  to 
impose  upon  its  members  an  arbitrary  scale  of  wants  that  must  be 
satisfied — in  other  words,  if  demand  and  consumption  are  to  remain 
free — it  can  only  be  by  adopting  that  system  which  recognises  a 
difference  between  the  present  and  the  future  "  rentability  "  of  the 
product.  This  difference  between  the  sale  price  and  the  real  cost 
of  production  of  any  commodity  must,  it  seems  to  us,  be  recognised 
even  by  a  collectivist  society  as  the  only  method  of  knowing  whether 
the  satisfaction  which  a  commodity  gives  is  in  any  way  commen- 
surate with  the  labour  involved  in  its  production.1  Pareto  has  given 
an  excellent  demonstration  of  this  by  showing  how  collectivist  society 
will  have  to  take  account  of  price  indications  if  social  demand  is  to 
be  at  all  adequately  supplied. 

2.  Turning  to  the  other  desideratum,  namely,  a  fuller  utilisa- 
tion of  the  means  of  production,  Rodbertus  contents  himself  with 
quoting  the  criticisms  of  the  Saint-Simonians  concerning  the  absence 
of  conscious  direction  which  characterises  the  present  regime  and 
the  hereditary  element  which  is  such  a  common  feature  of  economic 
administration.     He  is  in  full  agreement  with  Sismondi  when  the 
latter  declares  that  production  is  entirely  at  the  option  of  the 
capitalist  proprietor.2     In  this  matter  he  is  content  merely  to  follow 
his  leaders,   without  making  any  contribution  of  his  own  to  the 
subject. 

3.  There  still  remains  a  third  economic  function  which  society 
ought    to    perform,   and    which   Rodbertus    considered    the    most 
important  of  all,  namely,  the  distribution  of  the  social  product. 
An  analysis  of  the  present  system  of  distribution  was  one  of  the 

1  He  is  dealing  merely  with  individual  wants.  Rentability  is  iiot  the  only 
guide.  Many  collective  wants  must  be  satisfied,  but  the  process  is  not  always  a 
profitable  one.  The  problem  is  to  determine  which  are  those  wants.  Rodbertui 
is  speaking  of  private  wants  ;  he  has  taken  good  care  to  leave  the  public  n«eda 
aside,  so  that  his  argument  applies  only  to  the  former. 

•  Kapitai,  pp.  164-166. 


422  STATE  SOCIALISM 

tasks  he  had  set  himself  to  accomplish,  believing  with  Sismondi  and 
other  socialists  that  a  solution  of  the  problem  of  distribution  and 
the  explanation  of  such  phenomena  as  economic  crises  and  pauperism 
constitute  the  most  vital  problems  which  face  the  science  at  the 
present  moment. 

A  just  distribution,  in  Rodbertus's  opinion,  should  secure  to 
everyone  the  product  of  his  labour.1  But  does  not  the  present 
regime  of  free  competition  and  private  property  accomplish  this  ? 

Let  us  watch  the  mechanism  of  distribution  as  we  find  it 
operating  at  the  present  time.  Rodbertus's  description  of  it  is  not 
very  different  from  J.  B.  Say's,  and  it  tallies  pretty  closely  with 
the  Classical  scheme.  On  the  one  hand  we  have  the  entrepreneur 
who  purchases  the  services  of  labour,  land,  and  capital,  and  sells 
the  product  which  results  from  this  collaboration.  The  prices 
which  he  pays  for  these  services  and  the  price  he  himself  receives 
from  the  consumer  are  determined  by  the  interaction  of  demand 
and  supply.  What  remains  after  paying  wages,  interest,  and  rent 
constitutes  his  profits.2 

The  distribution  of  the  product  is  effected  through  the  mechanism 
of  exchange,  and  the  result  of  its  operation  is  to  secure  to  the  owner 
of  every  productive  service  the  approximate  market  value  of  that 
service.  Could  anything  be  juster  ?  Apparently  not.  But  if  we 
examine  the  social  and  economic  hinterland  behind  this  mechanism 
what  we  do  find  is  the  callous  exploitation  of  the  worker  by  every 
capitalist  and  landlord.  The  various  commodities  which  are 
distributed  among  the  different  beneficiaries  are  really  the  products 
of  labour.  They  are  begotten  of  effort  and  toil — largely  mechanical. 
Rodbertus  did  not  under-value  intellectual  work  or  under-estimate 
the  importance  of  directive  energy.  But  intelligent  effort  seemed 
to  him  an  almost  inexhaustible  force,  and  its  employment  should 
cost  nothing,  just  as  the  forces  of  nature  may  be  got  for  nothing. 
Only  manual  labour  implies  loss  of  time  and  energy — the  sacrifice 
of  something  that  cannot  be  replaced.3  Consequently  he  does  not 

1  Rodbertus  further  adds  that  a  portion  of  everybody's  income  should  be 
expended  in  supplying  such  publio  needs.     (Kapital,  pp.  132-133.) 

2  Kapital,  pp.  150-160. 

3  Cf.  Zur  Erkenntniss,  pp.  7-10 :    "  Every  economic  good  costs  labour  and 
only  labour."    In  the  third  of  the  Soziale  Brief e  he  expresses  this  idea  in  a 
slightly  different  form :    "  All  economic  goods  are  the  product  of  labour  " 
(Schriften,  vol.  ii,  pp.  105-106).     Developing  the  same  thought,  he  declares  that 
this  formula  means:    (1)  that  "only  those  goods  which  have  involved  labour 
should  figure  in  the  category  of  economic  goods  "  ;    (2)  that,  "  economically 
speaking,  goods  are  regarded,  not  as  the  product  of  nature  or  of  any  other  force, 
but  simply  as  the  product  of  labour  "  ;  (3)  that  "  goods  economically  considered 


RODBERTUS  423 

recognise  the  intellectual  or  moral  effort  (the  name  is  immaterial) 
involved  in  the  postponement  of  consumption,  whereby  a  present 
good  is  withheld  with  a  view  to  contributing  to  the  sum  total  of 
future  good.1  And  he  proceeds  to  define  and  to  develop  the 
opening  paragraph  of  Smith's  Wealth  of  Nations :  "  The  annual 
labour  of  every  nation  is  the  fund  which  originally  supplies  it  with 
all  the  necessaries  and  conveniences  of  life  which  it  annually  con- 
sumes, and  which  consist  always  either  in  the  immediate  produce 
of  that  labour  or  in  what  is  purchased  with  that  produce  from  other 
nations." 

The  difference  between  his  attitude  and  Marx's  is  also  interesting. 
Marx  was  thoroughly  well  versed  in  political  economy,  and  had 
made  a  special  study  of  the  English  socialists.  His  one  object  was 
to  set  up  a  new  theory  of  exchange,  with  labour  as  the  source  of  all 
value.  Rodbertus,  who  drew  his  inspiration  from  the  Saint- 
Simonians,  focused  attention  upon  production,  and  treated  labour 
as  the  real  source  of  every  product — a  simpler,  a  truer,  but  a  still 
incomplete  proposition.  Rodbertus  never  definitely  commits  him- 
self to  saying  that  labour  by  itself  creates  value,  but,  on  the  other 
hand,  he  never  denies  it.1  Social  progress,  he  always  maintained, 
must  consist  in  the  greater  degree  of  coincidence  8  between  the  value 
of  a  product  and  the  quantity  of  labour  contained  in  it.  But  this 

are  just  the  product  of  labour,  carried  out  by  means  of  the  material  operations 
which  are  necessary  for  production."  The  work  of  industrial  direction  and  ite 
remuneration  are  regarded  in  the  same  light.  Of.  Schriften,  vol.  ii,  p.  219. 

1  On  this  point  see  Rist's  Le  Capital  provient-il  uniqucment  du  Travail  t  in 
the  Revue  d'lSconomie  politique,  February  1906. 

*  Rodbertus  expressly  declares  that  to  say  that  goods  are  the  product  of 
labour  is  not  to  imply  that  the  value  of  the  product  is  always  equal  to  what  it  cost 
in  the  way  of  labour,  or,  in  other  words,  that  the  labour  spent  on  it  does  not 
always  measure  its  value  (Schrifttn,  vol.  ii,  pp.  104,  105).  A  similar  state- 
ment  is  made  in  the  Forderungen  (1837).  In  the  Zur  Erkenntnist  (1842) 
(pp.  129-131)  he  gives  some  of  the  reasons  why  he  thinks  that  the  value  of  a 
product  is  not  equal  to  the  labour  it  has  cost:  (1)  There  is  the  necessity 
for  equalising  the  gains  of  capital ;  (2)  the  price  of  a  unit  of  any  com- 
modity is  fixed  by  the  price  of  the  unit  which  costs  most  to  reproduce. 
In  the  second  of  the  Soziale  Briefe  he  repeats  the  statement  that  the  labour 
value  theory  is  nothing  better  than  an  ideal  (Kapital,  Appendix,  p.  279).  In  a 
letter  written  to  R.  Meyer  on  January  7,  1872,  he  affirms  the  demonstration 
which  he  had  already  given,  "  that  goods  do  not  and  cannot  exchange  merely  in 
proportion  to  the  quantity  of  labour  which  has  been  absorbed  by  them  simply 
because  of  the  existence  of  capital  "  ;  and  he  adds  the  significant  words  :  "  a 
demonstration  that  might  in  case  of  need  be  employed  against  Marx." 

8  "  The  coincidence  between  the  value  of  the  products  and  the  quantity  of 
labour  involved  in  their  production  is  simply  the  most  ambitious  ideal  that 
economics  has  ever  formulated."  (Second  Suzial  Brief.) 


424  STATE  SOCIALISM 

is  a  task  which  the  future  must  take  in  hand.1  Again,  if  it  be  true 
that  the  worker  creates  the  product,  but  that  the  proprietors  of  the 
soil  and  the  capitalists  who  have  had  no  share  in  its  production  are 
able  to  manipulate  exchange  in  such  a  way  as  to  retain  a  portion  of  it 
for  themselves,  it  is  clear  that  our  judgment  concerning  the  equity  of 
the  present  system  needs  some  revision.  This  secret  embezzlement 
for  the  profit  of  the  non- worker  and  to  the  injury  of  the  diligent 
proceeds  without  any  outward  display  of  violence  through  the 
free  play  of  exchange  operating  within  a  system  of  private  property. 
Its  sole  cause  lies  in  the  present  social  system,  "  which  recognises  the 
claim  of  private  landowners  and  capitalists  to  a  share  of  the  wealth 
distributed,  although  they  have  contributed  nothing  towards  its 
production."  * 

Hence  his  exposition  of  the  twofold  aspect  of  distribution. 
Economically  exchange  attributes  to  each  of  the  factors  land, 
capital,  and  labour  a  portion  of  the  produce  corresponding  to  the 
value  of  their  respective  services  as  estimated  in  the  market.  Socially 
it  often  means  taking  away  from  the  real  producers — from  the 
workers — a  part  of  the  goods  which  their  toil  has  created.  This 
portion  Rodbertus  refers  to  under  the  simple  name  "rent,"  which 
includes  both  the  revenue  of  capitalists  and  the  income  of  landlords. 

No  economist  ever  put  the  twofold  aspect  of  the  problem  in  a 
clearer  light.  Laying  hold  of  the  eternal  opposition  between  the 
respective  standpoints,  he  emphasises  the  difficulties  which  they 
present  to  so  many  minds.  Justice  would  relate  distribution  to 
merit,  but  society  is  indifferent  provided  its  own  needs  are  satisfied. 
Society  simply  takes  account  of  the  market  value  of  these  products 
and  services  without  ever  showing  the  least  concern  for  their  origin 
or  the  efforts  which  they  may  originally  have  involved — the  weary 
day  of  the  industrious  labourer  and  the  effortless  lounge  of  the 
lazy  capitalist  being  similarly  rewarded.  Rodbertus's  great  merit 
was  to  separate  this  truth  from  the  other  issues  so  frequently  confused 
with  it  in  the  writings  of  the  earlier  economists  and  to  bring  it 
clearly  before  the  notice  of  his  fellow  economists. 

1  Occasionally  Rodbertus  admits  for  the  sake  of  hypothesis  or  demonstration 
that  prices  do  coincide  with  the  labour  cost ;  but  his  essential  theory  has  no  need 
of  any  such  hypothesis,  and  it  really  plays  quite  an  auxiliary  or  subordinate  rdle. 
It  is  in  the  course  of  his  exposition  of  the  theory  concerning  the  distribution  of 
unearned  income  between  landed  proprietors  and  capitalists  (quite  an  erroneous 
theory,  by  the  way)  that  he  is  driven  «to  admit  that  "  the  exchange  value  of  each 
completed  product,  as  well  as  of  each  portion  of  the  product,  is  equal  to  its  labour 
value."  (Third  Sozial  Brief,  Schriften,  vol.  ii,  p.  101.) 

*  Kapitai,  p.  106. 


RODBERTUS  425 

Rodbertus's  criticism  did  not  end  there,  although  the  demon- 
stration which  we  have  just  given  of  the  distinction  between  the 
social  and  the  purely  economic  point  of  approach  to  distribution 
constitutes  its  essential  merit.  We  must  not  omit  the  practical 
conclusions  which  he  draws  from  it. 

What  concerned  Rodbertus  most — at  least,  so  we  imagine  from 
the  standpoint  which  he  adopted — :was  not  the  particular  way 
in  which  the  rate  of  wages  or  interest,  high  or  low  rents,  are 
determined,  but  the  proportion  of  the  revenue  that  goes  to  the 
workers  and  non-workers  respectively.  The  former  question  is 
a  purely  economic  one  of  quite  secondary  importance  compared 
with  this  other  social  problem.  Believing  that  he  had  already 
shown  the  possibility  of  the  workers  being  robbed,  the  problem 
now  was  to  determine  whether  this  spoliation  was  likely  to  continue. 
Does  economic  progress  give  any  ground  for  hoping  that  rent  or 
unearned  income  will  gradually  disappear  ?  Bastiat  and  Carey  had 
replied  in  the  affirmative.  The  proportion  that  goes  to  capital, 
so  they  affirmed,  is  gradually  becoming  less,  to  the  great  advantage 
of  the  labourer.  Ricardo,  faced  with  the  same  dilemma,  had 
come  to  the  conclusion  that  with  the  inevitable  increase  in  the 
cost  of  producing  food  the  landowner's  share  must  be  constantly 
growing.  Say  had  asked  himself  the  same  question  in  the  earliest 
edition  of  his  treatise,  but  had  found  no  reply.  Rodbertus  adopts 
none  of  their  solutions,  but  independently  arrives  at  the  con- 
clusion that  the  worker's  share  gradually  dwindles,  to  the  advantage 
of  the  other  participants.1 

Theorist  as  he  was,  a  simple  deduction  was  all  that  was 
needed  to  convince  him  of  the  truth  of  this  view.  The  rate  of 
wages,  we  have  already  seen,  is  determined  by  the  interaction  of 
demand  and  supply  in  the  labour  market.  The  market  price  of 
labour,  however,  like  that  of  any  other  product,  is  always  gravitating 
towards  a  normal  value — this  normal  value  being  none  other  than 
Ricardo's  necessary  wage.  "  The  share  of  the  product  that  falls  to 
the  lot  of  the  producer  both  in  an  individual  instance  and  as  a 
general  rule  is  not  measured  by  the  amount  which  he  himself  has 
produced,  but  by  that  quantity  which  is  sufficient  for  the  upkeep 
of  his  strength  and  the  upbringing  of  his  children."  *  This  cele- 

1  "  Whenever  exchange  is  allowed  to  take  its  own  course  in  the  matter  of  dis- 
tributing the  national  dividend,  certain  circumstances  connected  with  the 
development  of  society  and  with  the  growing  productivity  of  social  labour  cause 
the  wages  of  the  working  classes  to  diminish  so  as  to  constitute  a  decreasing 
fraction  of  the  national  product."  (Second  Sozial Brief,  Schriften,  vol.  ii,  p.  37.) 

»  Kapital,  p.  153. 


426  STATE  SOCIALISM 

brated  "  brazen  law  "  became  the  pivot  of  Lassalle's  propaganda, 
although  it  was  never  definitely  recognised  by  Marx. 

Granting  the  existence  of  such  a  law,  and  admitting  also  that 
the  amount  produced  by  labour  is  always  increasing,  so  that  the 
mass  of  commodities  produced  always  keeps  growing,  a  very  simple 
arithmetical  calculation  suffices  to  show  that  the  total  quantity 
obtained  by  the  workers  always  remains  the  same,  representing  a 
diminished  fraction  of  the  growing  totality. 

A  similar  demonstration  affords  a  clue  to  the  prevalence  of 
crises.  The  entrepreneur  keeps  adding  to  the  mass  of  commodities 
produced  until  he  touches  the  full  capacity  of  social  demand.1 
But  while  production  grows  and  expands  the  worker's  share  dwindles, 
and  thus  his  demand  for  some  products  remains  permanently  below 
production  level.  The  structure  is  giving  way  under  the  very  feet 
of  the  unsuspecting  producer.2  This  theory  of  crises  is  simply  a 
re-echo  of  Sismondi,3  and  gives  an  explanation  of  a  chronic  evil 
rather  than  of  a  crisis  pure  and  simple.  Its  scientific  value  is  just 
about  equal  to  Sismondi's  other  theory  concerning  proportional 
distribution. 

This  theory  upon  which  Rodbertus  laid  such  emphasis  had 
already  been  outlined  in  his  Forderungen,  and  a  fuller  development 
is  given  in  his  Soziale  Briefe,  where  he  expressly  states  it  to  be  the 
fundamental  point  of  his  whole  system,  all  else  being  mere  scaffold- 
ing. His  one  ambition  all  his  life  long  was  to  be  able  to  give  a 
statistical  proof  of  it,  but  its  importance  is  not  nearly  as  great  as  he 
imagined  it  to  be. 

In  the  first  place,  doubt  as  to  the  validity  of  the  "  brazen  "  or 
"  iron  law  of  wages  " — upon  which  the  theory  is  based — is  enter- 
tained not  merely  by  economists,  but  also  by  socialists.  And  even 

1  The  idea  that  entrepreneurs  base  their  production  upon  the  demand  of  the 
higher  classes  is  a  somewhat  novel  one,  but  it  is  quite  definitely  stated  by  Rod- 
bertus. "  The  classes  can  only  influence  the  market  in  proportion  to  the  quantity 
of  the  social  product  which  is  given  them.  But  the  entrepreneurs  must  deter- 
mine the  quantities  which  they  will  produce,  according  to  the  size  of  their 
demands."  (Kapital  pp.  51-52,  Cf.  also  pp.  170-171.)  It  is  quite  obvious,  on 
the  contrary,  that  the  entrepreneurs  base  their  production  solely  upon  the 
demand  for  the  particular  goods  which  they  manufacture,  and  that  they  are  quite 
indifferent  to  the  share  which  goes  to  the  higher  classes. 

•  Kapital,  p.  53. 

3  We  shall  soon  be  convinced  of  the  similarity  that  exists  between  the  two 
theories  if  we  read  the  passage  in  the  article  on  Balance  des  Consommationa 
avec  lee  Productions,  published  by  Sismondi  aa  an  appendix  to  the  second 
edition  of  the  Nouveaux  Principes,  vol.  ii,  p.  430.  Rodbertus  agrees  with 
Sismondi  that  equilibrium  will  be  re-established  in  the  long  run,  but  that  in  the 
meantime  a.  crisis  may  have  to  intervene.  (Kapital,  p.  171,  note  ;  of.  p,  190.  supra.) 


RODBERTUS  427 

if  it  were  true,  Rodbertus's  proof  would  still  be  inconclusive,  for  the 
workers'  share  of  the  total  product  depends  not  upon  one  fact  alone, 
but  upon  two — the  rate  of  wages  and  the  number  of  workers.  Rod- 
bertus's error  and  Bastiat's  are  very  similar.  Bastiat  had  tried  to 
determine  the  capitalists'  share  of  the  total  product  by  taking 
account  of  one  fact  only,  namely,  the  rate  of  interest,  whereas  he 
ought  to  have  taken  the  amount  of  existing  capital  into  consideration 
as  well. 

But  we  must  admit  that  although  the  arguments  used  by 
Rodbertus  are  scarcely  more  reliable  than  Bastiat's,  his  theory 
itself  is  nearer  the  facts  as  judged  by  statistics.  No  amount  of 
a  priori  reasoning  without  some  recourse  to  statistics  can  ever  solve 
the  problem.  Statistics  themselves  seem  to  prove  that  labour's 
portion,  in  some  countries  at  least,  has  shown  signs  of  diminishing 
since  the  beginning  of  the  present  century. 

This  does  not  necessarily  mean  that  the  worker  must  be  worse 
off,  for  it  may  well  happen  that  a  diminution  in  the  general  share 
obtained  by  labour  is  accompanied  by  a  growth  of  individual  wages. 
All  that  we  can  conclude  is  that  wages  have  not  increased  as  rapidly 
as  has  capital's  share,1  but  this  has  not  prevented  the  workers 
sharing  in  the  general  growth  of  prosperity. 

Logically  enough,  Rodbertus  proceeds  to  draw  certain  practical 
conclusions,  including  the  necessity  for  the  suppression  of  private 
property  and  of  individual  production.  The  community  should  be 
the  sole  owner  of  the  means  of  production.  Unearned  income  must 
go.  Everyone  should  contribute  something  to  the  national  dividend, 
and  each  should  share  in  the  total  produce  in  proportion  to  his 
labour.  The  value  of  all  commodities  will  depend  upon  the  amount 

1  Such,  as  we  have  already  seen,  is  Colson's  conclusion  (Coura,  vol.  iii,  p.  366), 
and  such  is  the  verdict  of  M.  Chatelain  after  studying  the  United  States  census 
returns.  According  to  Chatelain  (Questions  pratiques  de  Legislation  ouvritre, 
June  and  July,  1908),  the  American  metal-workers'  share  in  the  product  fell 
from  71  to  68  per  cent,  between  the  years  1890  and  1905,  while  capital's  share 
increased  from  28  to  32  per  cent.  The  men's  wages  during  the  same  period 
rose  from  651  dollars  to  626,  while  the  rate  of  interest  fell  from  9  to  8  per 
cent.  Despite  this  diminution  in  labour's  share  of  the  total  product  it  is  im- 
possible to  say  whether  the  remuneration  of  labour  in  general  is  moving  upward 
or  downward,  for  the  working  classes  do  not  depend  solely  upon  the  wages  of 
their  labour.  Some  of  them  have  a  little  capital — a  very  small  amount,  perhaps, 
but  there  is  no  reason  for  thinking  that  it  will  not  grow  in  future. 

It  is  quite  clear  that  this  complicated  question  must  be  carefully  defined. 
Three  different  factors  must  be  distinguished:  (1)  The  individual's  wage; 
(2)  labour's  share  in  the  product ;  (3)  the  income  of  the  working  class.  On  this 
problem  see  Edwin  Caiman's  article  in  the  Quarterly  Journal  of  Economic*, 
1905,  and  his  statements  in  his  Theory  of  Production  and  Distribution  1776-1848 


428  STATE  SOCIALISM 

of  time  spent  on  them  and  effort  put  into  them  ;  and  since  the  supply 
will  always  adapt  itself  to  the  needs  of  society  the  measure  will  be 
constant  and  exact,  and  equal  distribution  will  be  assured. 

But  Rodbertus  recoils  from  his  own  solution,  and  the  ardent 
socialist  becomes  a  simple  State  Socialist.  What  frightens  him  is 
not  the  terrible  tyranny  of  a  system  under  which  production  and 
even  consumption  would  be  strictly  regulated.  "  There  would  be 
as  much  personal  freedom  under  a  system  of  this  kind  as  in  any 
other  form  of  society,"  he  remarks,1  "  society  "  evidently  always 
implying  some  measure  of  restraint.  His  apprehension  was  of 
a  different  kind.  He  had  a  perfect  horror  of  any  revolutionary 
change,  and  stood  aghast  at  the  lack  of  education  displayed  by  the 
masses.  He  realised  how  unwilling  they  were  to  sacrifice  even  a 
part  of  their  wages  in  order  to  enable  other  men  to  have  the  necessary 
leisure  to  pursue  the  study  of  the  arts  and  sciences — the  noblest 
fruits  of  civilisation.  Finally  it  seemed  to  him  that  illegal  appro- 
priation and  the  rightful  ownership  which  results  from  vigorous  toil 
are  too  often  confused  by  being  indiscriminately  spoken  of  as 
private  property.  *'  There  is,"  says  he,  "  so  much  that  is  right 
mixed  up  with  what  is  wrong  that  one  goads  the  lawful  owner  into 
revolt  in  trying  to  lay  hold  of  the  unlawful  possessor."  2 

Some  kind  of  compromise  should  at  all  costs  be  effected.  If 
private  property — one  of  the  great  evils  of  the  present  day — cannot 
be  got  rid  of  without  some  inconvenience,  cannot  we  possibly 
dispense  with  freedom  of  contract,  the  other  source  of  inequality  ? 
Let  us  assume,  then,  that  we  have  got  rid  of  free  contract  while 
retaining  the  institution  of  private  property.  By  doing  this, 
although  we  are  not  immediately  able  to  clear  away  unearned 
income,  we  shall  have  removed  some  of  the  greatest  inconveniences 
that  result  from  it.  We  shall  arrest  the  downward  trend  of  labour's 
remuneration,  and  poverty  and  crises  will  disappear  together.3 

Such  an  attempt  might  be  made  even  now.  Let  the  State 
estimate  the  total  value  of  the  social  product  in  terms  of  labour 

»  Kapital,  p.  176.  a  Ibid.,  p.  187. 

3  "  And  so  I  believe  that  just  as  history  is  nothing  but  a  series  of  compromises, 
the  first  problem  that  awaits  economic  science  at  the  present  moment  is  that  of 
effecting  some  kind  of  a  working  compromise  between  labour,  capital,  and 
property."  (Kapital,  p.  187.)  In  a  letter  written  on  September  18,  1873,  to 
R.  Meyer,  he  declares  that  the  great  problem  "  is  to  help  us  to  pass  by  a  peaceful 
evolution  from  our  present  system,  which  is  based  upon  private  property  in  land 
and  capital,  to  that  superior  social  order  which  must  succeed  it  in  the  natural 
course  of  history,  which  will  bo  based  upon  desert  and  the  mere  ownership  of 
income,  and  which  is  already  showing  itself  in  various  aspects  of  social  life,  as  ii 
it  were  already  on  the  point  of  coming  into  operation." 


RODBERTUS  429 

and  determine  the  fraction  that  should  go  to  the  workers.  Let  it 
give  to  each  entrepreneur  in  accordance  with  the  number  of  workers 
he  employs  a  number  of  wage  coupons,  in  return  for  which  the 
entrepreneur  shall  be  obliged  to  put  on  the  market  a  quantity  of 
commodities  equal  in  value.  Lastly,  let  the  said  workers,  paid  in 
wage  coupons,  supply  themselves  with  whatever  they  want  from 
the  public  stores  in  return  for  these  coupons.  The  national  estimate 
would  from  time  to  time  be  subject  to  revision ;  and  in  order  that 
the  proportions  should  always  be  the  same,  the  number  of  coupons 
given  to  labour  would  have  to  be  increased  if  the  number  of  com- 
modities produced  ever  happened  to  increase.  Rodbertus's  aim 
was  to  give  the  workers  a  share  in  the  general  progress  made,  and 
such  was  the  plan  which  he  laid  down.1 

There  is  no  need  to  emphasise  its  theoretical,  let  alone  its 
practical  difficulties.  We  were  led  to  mention  it  for  a  double 
reason.  In  the  first  place,  it  is  interesting  as  an  attempt  to  effect 
a  compromise  between  the  society  of  the  present  and  the  collectivism 
of  the  future.  Marx  regards  the  growing  servility  of  the  worker 
with  a  certain  measure  of  equanimity  as  a  necessary  preliminary 
to  his  final  emancipation.  Rodbertus  would  speed  the  process  of 
amelioration  and  would  better  his  lot  here  and  now.2  It  also 
throws  an  interesting  light  upon  his  extraordinary  confidence  in  the 
all-powerful  sovereignty  of  the  State,  and  the  ability  of  government 
to  bend  every  individual  will,  even  the  most  recalcitrant,  to  the 
general  will.  At  the  same  tune  it  reveals  his  utter  indifference  to 
individual  liberty  as  an  economic  motive. 

This  indifference  gradually  merges  into  extreme  hostility,  while 
his  confidence  in  the  centralised  executive  becomes  all  the  more 
thoroughly  established.  His  later  historical  works  contain  an 
exposition  of  an  organic  theory  of  the  State  which  is  meant  to 
justify  such  confidence.  Just  as  in  the  animal  world  the  higher 
animals  are  found  to  possess  the  most  highly  differentiated  organs 
as  well  as  the  most  closely  co-ordinated,  so  in  history  as  we 
pass  from  the  lower  social  strata  to  the  higher  ones  "  the  State 
advances  both  in  magnitude  and  efficiency;  and  its  action,  while 
increasing  in  scope,  grows  in  intensity  as  well.  The  State  in  its 

1  Cf.  Kapital,  pp.  109  et  seq.,  and  especially  his  article  Der  Normalarbeitstag, 
which  appeared  in  1871  and  was  republished  in  Brief e  u.  Sozialpolitische  Aufsatze, 
p.  552  et  seq.  The  idea  of  determining  value  in  the  way  Rodbertua  intended 
was  criticised  by  Marx  in  his  Mis&re,  de  la  Philosophic,  d  propoa  of  Proudhon'a 
attempt  in  1847.  The  socialisation  of  production  involves  the  socialisation  of 
exchange  as  well.  This  is  another  point  upon  which  Marx  and  Rodbertus  differ. 
»  Cf.  Kapital,  p.  188,  note. 


430  STATE  SOCIALISM 

passage  from  one  evolutionary  stage  to  another  presents  us  not 
merely  with  a  greater  degree  of  complexity,  each  function  being  to 
a  greater  and  greater  extent  discharged  by  some  special  organ,  but 
also  with  an  increasing  degree  of  harmony.  The  social  organisms, 
despite  their  ever-increasing  variation,  are  placed  in  growing  depend- 
ence upon  one  another  by  being  linked  to  some  central  organ.  In 
other  words,  the  particular  grade  that  a  social  organism  occupies  in 
the  organic  hierarchy  depends  upon  the  degree  to  which  division  of 
labour  and  centralisation  have  been  carried."  l 

We  are  thus  driven  back  upon  the  fundamental  question  set  by 
Rodbertus  at  the  outset  of  his  inquiry:  Can  the  various  social 
functions,  acting  spontaneously,  efficiently  further  the  good  of  the 
social  body,  or  should  these  functions  be  discharged  by  the  media- 
tion of  a  special  organ,  the  State  or  Government  ?  There  is  also 
the  further  question  as  to  whether  the  reply  which  he  gives  is  entirely 
satisfactory. 

We  are  immediately  struck  by  a  preliminary  contradiction : 
the  economic  boundaries  of  the  community  do  not  coincide  with  its 
political  boundaries.  The  one  is  the  result  of  division  of  labour 
and  is  coextensive  with  the  limits  set  by  division  of  labour,  while 
the  second  is  the  product  of  the  changing  conditions  of  history.  It 
is  only  logical  that  the  economic  functions  of  the  State  should  be 
performed  by  other  organs  than  those  of  the  political  Government, 
since  its  sphere  of  action  is  necessarily  different.  But  it  is  to  the 
State,  as  evolved  in  the  course  of  a  long  historical  process,  that 
Rodbertus  would  entrust  this  directing  power.  Between  Rodbertus 's 
description  of  the  State's  economic  activity  and  his  final  recourse  to 
a  national  monarchical  State  is  an  element  of  contradiction  which 
strikes  us  rather  forcibly,  especially  when  he  comes  to  speak  of 
"  national  "  socialism. 

In  order  to  demonstrate  how  inadequately  the  present  social 
organisation  performs  its  duties,  Rodbertus  appeals  to  an  ideal  method 
of  discharging  them  which  he  himself  has  created,  and  he  has  not 
the  slightest  difficulty  in  showing  that  hardly  any  of  his  ideal 
functions  are  being  performed  at  the  present  time.  Production  is 
not  based  upon  social  need,  nor  is  the  wealth  produced  distributed 
in  accordance  with  the  labour  spent.  But  we  must  never  forget 
that  Rodbertus's  conception  of  the  social  need  was  extremely 
hazy.  His  distribution  formula,  "  to  everyone  according  as  he 
produces,"  if  applied  logically  is  impossible,  and  satisfies  neither 

*  Zur  Gesrhickle,  der  romischen  Tributsteuer,  in  Jahrbttcker  fiir  National- 
dkonomie  a.  Statistik,  vol.  viii,  pp.  446-447,  note. 


RODBEHTUS  431 

the  demands  of  humanity  nor  the  needs  of  production.  Had  his 
definition  of  social  function  been  less  ambitious,  his  argument, 
perhaps,  would  have  been  more  convincing. 

Let  us  admit,  however,  that  the  existence  of  an  economic  society 
implies  the  successful  accomplishment  of  certain  functions  which 
we  need  not  trouble  to  define  just  now.  The  question  then  arises — 
a  question  that  implies  the  severest  criticism  of  the  present  organisa- 
tion :  Can  the  control  and  oversight  which  men  ought  to  exercise 
over  these  functions  be  performed  otherwise  than  through  the 
instrumentality  of  the  State  ?  There  was  only  one  alternative  for 
Rodbertus — extreme  individualism  or  State  control.  But  nature 
and  history  both  escape  the  dilemma.  The  biological  analogy 
has  been  carried  too  far,  and  most  writers  would  be  content  to 
abandon  it  altogether.  Like  most  of  his  contemporaries,  Rodbertus 
imagined  that  economic  individualism  and  personal  liberty  were 
indissolubly  bound  together,  and  that  it  was  impossible  to  check 
individualism  without  endangering  liberty.  It  is  now  realised, 
however,  that  this  association  of  ideas,  like  many  another,  is  tem- 
porary and  not  eternal,  and  the  growth  of  voluntary  associations 
intermediate  between  the  State  and  the  individual  is  every  day 
showing  it  to  be  false. 

We  are  now  in  a  better  position  to  appreciate  the  kind  of  appeal 
which  this  doctrine  would  make  to  State  Socialists — people  who  are 
essentially  conservative,  but  nevertheless  genuinely  desirous  of 
seeing  a  larger  element  of  justice  introduced  into  our  industrial 
regime.  The  distinction  drawn  between  politics  and  economic 
socialism  makes  a  first  claim  upon  their  respect.  Then  would  follow 
the  organic  conception  of  society,  which  is  a  feature  of  all  Rodbertus's 
writings.  It  was  his  belief  that  production  and  distribution  could 
only  be  regarded  as  social  functions,  and  that  the  breakdown  of 
individualism  implied  a  need  for  greater  centralisation  or  a  greater 
degree  of  State  control.  On  the  other  hand,  the  State  Socialists 
refuse  to  associate  themselves  with  the  radical  condemnation  of 
private  property  and  unearned  income,  both  of  which  are  features 
of  Rodbertus's  teaching.  The  State  Socialists  set  out  to  transform 
the  Rodbertian  compromise  into  a  self-sufficing  system,  and  instead 
of  regarding  their  doctrine  as  a  diluted  form  of  socialism  they  are 
rather  inclined  to  treat  socialism  as  an  exaggerated  development  of 
their  theory.1 

*  "  Extreme  socialism,"  saye  Wagner,  "  is  simply  an  exaggeration  of  that 
partial  socialism  which  has  long  been  a  feature  of  the  economic  and  social  evolu- 
tion of  all  nations,  especially  the  most  civilised."  (Qrundlegung,  3rd  ed.,  p.  756.) 


432  STATE  SOCIALISM 

2.  LASSALLE 

Rodbertus's  efforts  to  establish  a  doctrine  of  State  Socialism 
upon  the  firm  foundation  of  a  new  social  theory  had  already  met 
with  a  certain  measure  of  success,  but  it  was  reserved  for  Lassalle 
to  infuse  vitality  into  these  new  ideas. 

Lassalle 's  brief  but  brilliant  political  career,  ever  memorable  for 
the  natural  vigour  of  his  eloquence,  at  once  popular  and  refined,  and 
its  indelible  impression  of  a  strikingly  original  nature  aflame  with  a 
passion  both  for  thought  and  action,  together  with  the  romantic, 
dramatic  character  of  his  checkered  existence,  lent  wonderful  force 
to  his  utterances.  In  1848,  at  the  early  age  of  twenty- three,  he 
was  a  Marxian  revolutionist.  The  revolutionary  period  was 
followed  by  a  time  of  enforced  inactivity,  when  he  devoted  himself 
almost  exclusively  to  philosophical,  legal,  and  literary  pursuits. 
In  1862  the  silence  was  at  last  broken  by  his  re-entry  into  the 
political  arena.  The  whole  political  life  of  Germany  was  at  that 
moment  convulsed  by  the  half-hearted  opposition  which  the 
Prussian  Liberal  party  was  offering  to  Bismarck's  constitutional 
changes.  Lassalle  declared  war  both  upon  the  Government  and 
upon  the  bourgeois  Opposition — upon  the  latter  more  than  the 
former,  perhaps.  Turning  to  the  working  classes,  he  urged  them 
to  form  a  new  party  which  would  avoid  all  purely  political  questions 
and  to  concentrate  upon  their  own  economic  emancipation.  For 
two  eventful  years  the  whole  of  Germany  resounded  with  his  speeches 
and  his  declamations  before  various  tribunals,  while  the  country 
was  flooded  with  his  pamphlets  advocating  the  complete  establish- 
ment of  the  Allgemeiner  deutscher  Arbeiterverein  (General  Association 
of  German  Workers),  which  he  had  already  founded  at  Leipzig  in 
1863.  The  workers  of  the  Rhineland  received  with  open  arms  the 
agitator  who  thus  took  up  in  their  midst  the  tangled  skein  of  a 
broken  career,  and  welcomed  him  with  songs  and  decked  him  with 
garlands.  The  Liberal  press,  on  the  other  hand,  thoroughly  taken 
aback  by  his  unexpected  onslaughts,  mercilessly  attacked  him,  even 
accusing  him  of  having  secret  dealings  with  the  Government. 
Suddenly  the  clamour  ceased  :  Lassalle  died  on  August  31,  1864,  as 
the  result  of  a  wound  which  he  had  received  in  a  duel,1  and  only  the 
Deutscher  Arbeiterverein,  the  earliest  embryo  of  the  great  German 
Social  Democratic  party,  remained  as  a  memento  of  those  violent 
attacks  upon  individualist  Liberalism. 

1  George  Meredith  in  his  Tragic  Comedians  weaves  his  story  round  this  tragic 
adventure,  giving  us  an  admirable  study  of  Lassalle's  psychology.  Cf.  also 
Lassalle,  by  Georges  Brandes,  and  Oncken's  Lassalle  (Stuttgart,  1904). 


LASSALLE  483 

As  far  as  theory  goes,  Lassalle's  socialism  is  hardly  distinguishable 
from  Marx's.  Social  evolution  is  summed  up  in  a  stricter  limitation 
of  the  rights  of  private  property,1  which  in  the  course  of  a  century 
or  two  must  result  in  its  total  disappearance.2  But  Lassalle  was 
pre-eminently  a  man  of  action,  bent  upon  practical  results.  At 
that  particular  moment  the  German  working  class  was  only  just 
waking  up  to  the  possibility  of  political  existence.  The  path  that 
it  should  follow  was  still  undecided.  In  the  year  1863  a  number  of 
workmen  had  tried  to  persuade  their  comrades  to  meet  together 
in  a  kind  of  general  congress.  They  further  appealed  to  Lassalle 
and  to  other  well-known  democrats  for  their  advice  concerning 
the  labour  question.  This  gave  Lassalle  the  opportunity  he 
required  for  forming  a  political  party  of  his  own,  with  himself  as 
chief.  The  next  question  was  to  fix  upon  a  programme.  "  Working 
men,"  says  Lassalle,  "  must  have  something  definite,"  *  and,  on  the 
other  hand,  "  it  is  almost  impossible  to  get  the  public  to  understand 
the  final  object  which  we  must  keep  in  view."  *  So,  without  burden- 
ing his  propaganda  with  too  remote  an  ideal,  he  concentrates  all  his 
efforts  upon  two  demands,  the  one  political,  the  other  economic — 
universal  suffrage  on  the  one  hand  and  the  establishment  of  producers' 
associations  supported  by  the  State  on  the  other.  In  order  to  win 
over  the  masses,  he  invoked,  not  the  doctrine  of  the  exploitation  of  the 
workers  by  the  proprietors — which  would  have  alienated  the  middle 
classes  from  him  6 — but  the  "  brazen  law  of  wages,"  which  is  the  happy 
title  by  which  he  chose  to  designate  the  Ricardian  law  of  wages. 

Rodbertus  realised  the  necessity  for  distinguishing  between  an 
esoteric  and  an  exoteric  Lassalle8 — between  the  logical  theorist  of 
'the  study  and  the  opportunist  politician  of  the  public  platform, 

1  Theorie  aystematique  des  Droits  acquit,  vol.  i,  p.  274,  note  (Paris,  1904). 

•  Brip.fe  von  iMasalle  an  Rodbertus,  p.  46  (Berlin,  1878). 

•  Ibid.,  p.  44. 

4  Freilich  darf  man  das  dem  Mob  heut  nodi  nicht  sayen.  (Ibid.,  p.  46.) 
6  "  No  workman  will  ever  forget  that  property  whenever  legally  acquired  is 
absolutely  inviolable  and  just,"  says  he  in  an  address  delivered  to  the  workers  of 
Berlin  on  April  12,  1862,  and  published  under  the  title  of  Arbeiterprogramm 
(Schriften,  vol.  i,  p.  197).  Elsewhere  he  defends  himself  against  the  charge  of  incit- 
ing the  proletariat  by  claiming  that  his  agitation  was  of  a  purely  democratic 
character,  and  intended  to  facilitate  the  fusion  of  classes  (ibid.,  vol.  ii,  pp. 
126-127).  (Our  quotations  are  taken  from  Pfau'a  edition.  We  were  unable  to 
obtain  the  latest  and  by  far  the  best  edition  of  Lassalle's  works,  published  by 
Bernstein.) 

•  Wagner's  introduction  to  Briefe  von  Lassalle  an  R<nlbertus,  p.  5.     Lassalle 
has  himself  defined  this  somewhat  Machiavellian  attitude  in  a  letter  written  to 
Marx  in  1859,  in  which  he  speaks  of  a  drama  which  he  had  just  written  dealing 
with  Franz  von  Sickingen.    "  It  looks  like  the  triumph  of  superior  realistic  ability 


434  STATE  SOCIALISM 

Only  to  his  contemporaries  was  the  latter  Lassalle  really  known. 
But  his  letters,  which  have  been  published  since  his  death,  go  to 
show  that  there  is  at  least  no  need  to  attach  any  greater  importance 
to  his  proposed  reforms  than  he  was  prepared  to  give  them  himself. 
It  is  not  necessary  to  emphasise  the  fact  that  his  plan  was  really 
borrowed  from  Louis  Blanc  or  to  call  attention  to  the  letter  written 
to  Rodbertus  in  which  he  declares  himself  quite  prepared  to  change 
his  plan  provided  a  better  one  can  be  found.  This  idea  of  association 
was  one  that  was  by  no  means  unknown  to  the  German  Liberal 
party ;  nor  was  it  the  first  time  that  it  had  been  preached  to  the 
working  classes.  Lassalle's  rival,  Schulze-Delitzsch,  had  begun  an 
active  campaign  even  as  far  back  as  1849,  and  had  succeeded  in 
establishing  a  great  number  of  co-operative  credit  societies,  composed 
largely  of  artisans,  and  aiming  at  supplying  them  with  cheap  raw 
materials.  But  such  associations  were  to  receive  no  support  from 
the  Government. 

What  was  new  in  Lassalle's  scheme  was  just  this  appeal  for 
State  intervention.  It  was  his  energetic  protest  against  eternal 
laissez-faire  that  impressed  public  opinion,  and  he  himself  was  anxious 
that  it  should  be  presented  in  this  light.  Speaking  to  the  workers 
of  Frankfort  on  May  19,  1863,  he  declared  that  "  State  inter- 
vention is  the  one  question  of  principle  involved  in  this  campaign. 
That  is  the  consideration  that  has  weighed  with  me,  and  there  lies 
the  whole  issue  of  the  battle  which  I  am  about  to  wage." 1 

He  harks  back  to  this  fundamental  idea  in  all  his  principal 
writings.  It  was  the  theme  of  his  first  address  delivered  to  the 
workers  in  Berlin  in  1862.  It  is  there  presented  with  all  his  cus- 
tomary force.  The  bourgeois  conception  of  the  State  is  contrasted' 
with  the  true  conception,  which  is  identical  with  the  workers'. 
The  bourgeoisie  seem  to  think  that  the  State  has  nothing  to  do 

when  the  leader  of  a  rebellion  takes  account  of  the  limited  means  at  his  disposal 
and  attempts  to  hide  from  other  men  the  real  object  which  he  has  in  view.  But 
the  success  achieved  by  deceiving  the  ruling  classes  in  this  way  puts  him  in 
possession  of  new  forces  which  enable  him  to  employ  this  partial  triumph  for  carry- 
ing out  his  real  object."  (Aus  dem  litterarischen  Nachlass  von  K.  Marx,  F.  Engelg, 
und  Lassalle,  vol.  iv,  p.  133 ;  published  by  F.  Mehring,  Stuttgart,  1902.) 

1  Schriften,  vol.  ii,  p.  99.  This  address  has  been  published  under  the 
title  of  Arbeiterlesebuch.  This  is  just  the  attitude  of  which  Marx  disapproved. 
In  a  letter  written  to  Schweitzer  on  October  13,  1868,  quoted  by  Mehring  (Au* 
dem  litterarischen  Nachlass,  etc.,  vol.  iv,  p.  362),  he  expresses  himself  as  follows  : 
"  He  is  too  liable  to  be  influenced  by  the  immediate  circumstances  of  the  moment. 
He  exaggerates  the  trivial  difference  between  himself  and  a  nonentity  like 
Schulze-Delitzsch,  until  the  issue  between  them,  governmental  intervention  aa 
against  private  initiative,  becomes  the  central  point  of  hi  agitation." 


LASSALLE  435 

except  to  protect  the  property  and  defend  the  liberties  of  the 
individual — a  conception  of  State  action  that  would  be  quite 
sufficient  were  everybody  equally  strong  and  intelligent,  equally 
cultured  and  equally  rich.1  But  where  such  equality  does  not 
exist  the  State  is  reduced  to  the  position  of  a  "  night  watchman," 
and  the  weak  is  left  at  the  mercy  of  the  strong.  In  reality  the 
State  exists  for  quite  other  purposes.  The  history  of  mankind  is  the 
story  of  one  long  struggle  to  establish  liberty  in  the  face  of  natural 
forces,  to  overcome  oppression  of  every  kind,  and  to  triumph  over  the 
misery,  ignorance,  want,  and  weakness  with  which  human  nature 
has  always  had  to  reckon.  In  that  struggle  the  individual,  in  his 
isolation,  is  hopeless  and  union  becomes  indispensable.  This  union 
is  a  creation  of  the  State,  and  its  object  is  to  realise  the  destiny  of 
mankind,  namely,  the  attainment  of  the  highest  degree  of  culture 
of  which  humanity  is  capable.  It  is  a  means  of  educating  and  of 
furthering  the  development  of  humanity  along  the  path  of  liberty. 
The  formula  savours  of  metaphysics  rather  than  of  economics. 
There  is  a  striking  similarity  between  it  and  the  formula  employed 
by  Hegel,  the  philosopher.1  Lassalle  was  really  a  disciple  of  Hegel 
andFichte.3  Through  the  influence  of  Lassalle  the  theories  of  the 

1  Schriften,  vol.  i,  p.  213. 

1  See,  among  others,  the  chapter  entitled  Hegel  et  la  Theorie  de  VEtat, 
in  Levy-Briihl's  L'Attemagne  depute  Liebnitz,  especially  p.  398  (Paris,  1890). 
The  State,  according  to  Hegel,  is  an  expression  of  the  spirit  realising  itself  in  the 
conscience  of  the  world,  while  nature  is  an  expression  of  the  same  spirit  without 
the  conscience,  an  alter  ego — a  spirit  in  bondage.  God  moving  in  the  world  has 
made  the  State  possible.  Its  foundation  is  in  the  might  of  reason  realising  itself 
in  will.  It  is  necessary  to  think  of  it  not  merely  as  a  given  State  or  a  particular 
institution,  but  of  its  essence  or  idea  as  a  real  manifestation  of  the  mind  of  God. 
Every  State,  of  whatever  kind  it  may  be,  partakes  of  this  divine  essence.  For 
full  information  concerning  the  philosophical  origin  of  State  Socialism  see 
Andler's  Le  Socialisme  (Tfitat  en  Allemagne  (1897). 

3  Fichte  issued  a  very  curious  work  in  1800  entitled  Der  geschlossene  Handels- 
staat,  published  in  vol.  iii  of  his  complete  works  (Berlin,  1845),  and  containing 
ideas  with  many  points  of  resemblance  to  those  of  State  Socialism.  Fichte 
thought  that  the  State  should  not  merely  guarantee  to  every  citizen  his  property, 
but  should  first  of  all  rear  its  citizens,  let  them  build  their  property,  and  then 
defend  it.  In  order  to  do  this  everyone  should  be  given  the  necessary  means  of 
livelihood,  for  the  one  aim  of  all  human  activity  is  to  live,  and  everyone  here 
has  an  equal  right  to-live  (p.  402) — a  declaration  of  the  right  of  existence.  Until 
all  are  so  provided  for  no  luxuries  should  be  allowed.  No  one  should  decorate  his 
house  until  he  feels  certain  that  everyone  has  a  house,  and  everyone  should  be 
comfortably  and  warmly  clad  before  anyone  is  elegantly  dressed  (p.  400).  "  Nor 
is  it  enough  to  say  that  I  can  afford  to  pay  for  it,  for  it  is  unjust  that  one  indi- 
vidual should  be  able  to  buy  luxuries  while  his  fellow  citizens  have  not  enough 
to  procure  the  necessaries  of  life.  The  money  with  which  the  former  purchases 


436  STATE  SOCIALISM 

German  idealists  came  into  conflict  with  the  economists',  and  his 
incomparable  eloquence  contributed  not  a  little  to  the  rising  tide  of 
indignation  with  which  the  Manchester  ideas  came  to  be  regarded. 


HI :  STATE  SOCIALISM— PROPERLY  SO  CALLED 

THE  years  that  elapsed  between  the  death  of  Lassalle  and  the 
Congress  of  Eisenach  (1872)  proved  to  be  the  decisive  period  in 
the  formation  of  German  State  Socialism. 

Bismarck's  remarkable  coups  d'ttat  in  1866  and  1870  had  done 
much  to  discredit  the  political  reputation  of  the  leaders  of  the 
Liberal  party,  who  had  shown  themselves  less  than  a  match  for  the 
Chancellor's  political  insight.  This  reacted  somewhat  upon 
economic  Liberalism,  because  it  so  happened  that  the  leaders  of 
both  parties  were  the  same.1  On  the  other  hand,  the  idea  of  a 
rejuvenated  empire  incarnate  in  the  Iron  Chancellor  seemed  to 
add  fresh  lustre  to  the  whole  conception  of  the  State.  The  Jahr- 
biicher  fur  Nationalokonomie,  first  issued  by  the  Historical  school  in 
1863,  had  by  this  time  become  the  recognised  organ  of  the  University 
Economists,  and  had  done  a  great  deal  to  accustom  men's  minds 
to  the  relative  character  of  the  principles  of  political  economy  and 
to  prepare  their  thoughts  for  an  entirely  new  point  of  view.  • 

Labour  questions  had  also  suddenly  assumed  an  importance 
quite  undreamt  of  before  this.  The  German  revolution  of  1848  was 

his  luxuries  would  in  a  rational  State  not  be  his  at  all."  Adopting  this  as  his 
guiding  principle,  Fichte  proposes  to  organise  a  State  in  which  the  members 
of  every  profession,  agriculturists,  artisans,  merchants,  etc.,  would  make  a 
collective  contract  with  one  another,  in  which  they  would  promise  not  to  en- 
croach upon  one  another's  labour,  but  would  guarantee  to  everyone  a  sufficient 
number  of  the  goods  which  each  has  made  for  his  own  use.  The  State  would  also 
undertake  to  see  that  the  number  of  persons  in  every  profession  was  neither  too 
few  nor  too  many.  It  would  also  fix  the  price  of  goods.  Lastly,  in  view  of  the 
fact  that  foreign  trade  would  naturally  upset  the  equilibrium  established  by  toa 
contract  which  guaranteed  security  of  existence  to  each  individual,  the  com- 
mercial State  would  have  to  be  entirely  hemmed  in  by  tariff  walls.  The  whole 
work  is  original  and  interesting.  A.  Menger,  who  gives  a  brief  risumt  of  it  in 
his  second  chapter  of  The  Right  to  the  Whole  Produce  of  Labour,  thinks  that 
Fichte  was  influenced  by  what  he  saw  of  the  Convention  during  the  Reign  of 
Terror,  by  the  issue  of  assignats,  and  perhaps  by  Babeuf.  Fichte,  on  the  other 
hand,  takes  care  to  point  out  that  his  commercial  State  is  not  realisable  as  such, 
but  that  a  book  like  his  is  not  less  useful  in  view  of  the  general  hints  which  it 
affords  a  statesman. 

1  It  is  remarkable  that  the  majority  of  the  commercial  and  financial  measures 
introduced  in  Germany  between  1866  and  1875,  such  as  a  uniform  system  of 
weights  and  measures,  the  reform  of  the  monetary  system,  banks,  the  tariffs,  etc., 
were  directly  inspired  by  the  principles  of  economic  Liberalism. 


PROPERLY  so  CALLED  437 

presumably  political  in  character :  the  great  capitalistic  industry 
had  not  reached  that  stage  of  development  which  characterised  it 
both  in  England  and  in  France ;  and  it  is  a  significant  fact  that 
the  two  great  German  socialists,  Rodbertus  and  Marx,  had  to  go 
abroad  to  either  of  those  two  countries  to  get  their  illustrations. 
But  since  1848  German  industry  had  made  great  strides.  A  new 
working-class  community  had  come  into  being,  and  Lassalle  had 
further  emphasised  this  transformation  by  seeking  to  found  a  party 
exclusively  upon  this  new  social  stratum.  The  association  which 
was  thus  founded  still  survives.  Another  agitation,  largely  inspired 
by  Marxian  ideas,  was  begun  about  the  same  time  by  Liebknecht 
and  Bebel.  In  1867  both  of  them  were  elected  to  the  Reichstag, 
and  two  years  later  they  founded  the  Socialdemokratische  Arbeiter- 
partei  (Social  Democratic  party),  which  was  destined  to  play 
such  an  important  part  in  the  history  of  the  next  thirty  years. 

In  this  way  labour  questions  suddenly  attracted  attention,  just 
as  they  had  previously  done  in  France  during  the  July  Monarchy ; 
and  just  as  in  France  a  new  current  of  opinion — unceremoniously 
set  aside  by  the  coup  d'ttat,  it  is  true — had  urged  upon  the  educated 
classes  the  importance  of  abandoning  the  doctrine  of  absolute 
laissez-faire  and  of  claiming  the  support  of  Government  in  the 
struggle  with  poverty,  so  in  Germany  an  increasing  number  of 
authors  had  persuaded  themselves  that  a  purely  passive  attitude 
in  face  of  the  serious  nature  of  the  social  problem  which  confronted 
them  was  impossible,  and  that  the  establishment  of  some  sort  of 
compact  between  the  warring  forces  of  capital  and  labour  should 
not  prove  too  much  of  an  undertaking  for  the  rejuvenated  vitality 
of  a  new  empire. 

The  new  tendencies  revealed  themselves  in  unmistakable  fashion 
at  Eisenach  in  1872.  A  conference,  which  was  largely  composed  of 
professors  and  economists,  of  administrators  and  jurists,  decided 
upon  the  publication  of  a  striking  manifesto  in  which  they  declared 
war  upon  the  Manchester  school.  The  manifesto  spoke  of  the  State 
as  "  a  great  moral  institution  for  the  education  of  humanity,"  and 
claimed  that  it  should  be  "  animated  by  a  high  moral  ideal,"  which 
would  "  enable  an  increasing  number  of  people  to  participate  in  the 
highest  benefits  of  civilisation." l  At  the  same  time  the  members 
of  the  congress  determined  upon  the  establishment  of  the  Verein 
fur  Sozialpolitik,  an  association  charged  with  the  task  of  procuring 

1  A  copy  of  the  text  translated  into  French  appeared  in  the  Revue  d' Economic 
poliiique,  1892.  The  translation  was  the  work  of  our  regretted  colleague  Saint- 
Marc, 


438  STATE  SOCIALISM 

the  necessary  scientific  material  for  this  new  political  development. 
This  was  the  beginning  of  the  "  Socialism  of  the  Chair,"  as  it  was 
derisively  named  by  the  Liberals  on  account  of  the  great  number 
of  professors  who  took  part  in  this  conference.  The  same  doctrine, 
with  a  somewhat  more  radical  bias,  became  known  as  State  Socialism. 
The  imparting  of  such  a  bias  was  the  task  undertaken  by  Wagner,1 
in  his  Grundlegung,  which  appeared  in  1876.2 

Difficult  though  the  task  may  prove,  we  must  try  to  distinguish 
between  the  work  of  the  earlier  economists  and  the  special  con- 
tributions made  by  the  State  Socialists.  Like  all  doctrines  that 
purport  to  sum  up  the  aspirations  of  a  group  or  an  epoch  and  to 
supply  a  working  agreement  between  principles  in  themselves 
irreconcilable,  it  lacks  the  definiteness  of  a  purely  individualistic  or 
theoretical  system.  Its  ideas  are  borrowed  from  various  sources, 
but  it  is  not  always  scrupulous  in  recognising  this. 

It  is  first  and  foremost  a  reaction,  not  against  the  fundamental 
ideas  of  the  English  Classical  school,  as  is  generally  believed,  but 
against  the  exaggerations  of  their  second-grade,  disciples,  the  admirers 
of  Bastiat  and  Cobden — known  to  us  as  the  "  Optimists "  and 
styled  the  "  Manchestrians  "  in  Germany.  The  manifesto,  drawn 
up  by  Professor  Schmoller  at  the  Eisenach  Congress,  speaks  of 
the  **  Manchester  school,"  but  makes  no  mention  of  the  Classical 
writers.3  It  is  true  that  a  great  many  German  writers  regard 
the  expressions  "  Smithianismus  "  and  "  Manchesterthum  "  as 

1  In  addition  to  Wagner  we  might  mention  Albert  Schaeffle,  who  has  shown 
considerable  literary  activity,  but  who  is  more  of  a  sociologist  than  an  economist. 
His  great  work,  Ban  und  Leben  des  sozialen  Korpers  (1875-78),  contains  an  organic 
and  biological  theory  of  society,  but  bis  best  known  book  is  the  Quintessenz  det 
Sozialismus. 

*  Wagner's  principal  works,  which  contain  an  exposition  both  of  the  ideas 
and  programme  of  State  Socialism,  are  Grundlegung  (1st  ed.  1876),  translated  into 
French   in  1900  under  the  title  Fondements  de  Vficonomie  poliiique, ;    Finanz- 
wisscnschaft ;   his  article  Stoat  in  the  Handworterbuch  der  Staatswissenschaften ; 
and  especially  two  articles  entitled  Finanzwissenschaft  and  Staatssozialismus, 
published  in  the  Zeitschrift  fur  die  gcsammte  Staatswissenschaft,  1887,  pp.  37-122, 
675-746.     One  might  profitably  consult  two  addresses,  the  one  of  March   29, 
1895,  Sozialismus,  Sozialdemokratie,  Katheder  u.  Staatssozialismus,  the  other  of 
April  21,  1892,  Das  neue  sozialdemokratische  Programm. 

*  It  is  a  curious  fact  that  Wagner's  definition  of  the  province  and  functions 
of  the  State   is  not  very  different  from  Smith's,  though  differing  considerably 
from  Bastiat's.     "  As  a  general  rule,"  says  he,  "  the  State  should  take  charge 
of  those  operations  which  are  intended  to  satisfy  the  wants  of  the  citizens,  but 
which  private  enterprise    or  voluntary  associations  acting  for  the  community 
either  cannot  undertake  or  cannot  perform  as  well  or  as  cheaply."    (Grundlegung, 
3rd  ed.,  1893,  1st  part,  p.  916.) 


PROPERLY  so  CALLED  439 

synonymous,  but  these  are  perhaps  polemical  exaggerations  upon 
which  we  ought  not  to  lay  too  much  stress.  On  the  other  hand, 
Liberalism  had  nowhere  assumed  such  extravagant  proportions  as 
it  had  in  Germany.  Prince  Smith,  who  is  the  best-known  repre- 
sentative of  Liberalism  after  Dunoyer,  was  convinced  that  the 
State  had  nothing  to  do  beyond  guaranteeing  security,  and  denied 
that  there  was  any  element  of  solidarity  between  economic  agents 
save  such  as  results  from  the  existence  of  a  common  market.  "  The 
economic  community,  as  such,  is  a  community  built  upon  the 
existence  of  a  market,  and  it  has  no  facility  to  offer  other  than 
free  access  to  a  market."  * 

The  State  Socialists,  on  the  contrary,  are  of  opinion  that 
there  exists  a  moral  solidarity  which  is  much  more  fundamental 
than  any  economic  tie  between  the  various  individuals  and  classes 
of  the  same  nation — such  solidarity  as  results  from  the  possession 
of  a  common  language,  similar  manners,  and  a  uniform  political 
constitution.  The  State  is  the  organ  of  this  moral  solidarity,  and 
because  of  this  title  it  has  no  right  to  remain  indifferent  to  the 
material  poverty  of  a  part  of  the  nation.  It  has  something  to  do 
besides  protecting  people  against  internal  or  external  violence.  It 
has  a  real  work  of  "  civilisation  and  well-being  "  *  which  it  ought 
to  perform.  In  this  way  State  Socialism  becomes  reconciled  to  the 
philosophic  standpoint  which  Lassalle  had  chosen  for  it.  Lassalle's 
insistence  upon  the  mission  of  Governments  and  the  importance 
of  their  historic  role  has  been  incorporated  into  its  system,  and 
the  attention  that  is  paid  to  national  considerations  reminds  one 
of  the  teaching  of  Friedrich  List. 

It  is  impossible  not  to  ask  whether  the  State  is  capable  of  carrying 
out  the  duties  that  have  been  entrusted  to  it.  There  is  little  use  in 
emphasising  duty  where  there  is  no  capacity  for  discharging  it. 
The  State's  incapacity  as  an  economic  agent  has  long  been  a  notorious 
fact.  Wagner  and  his  friends  were  particularly  anxious  to  correct 
this  false  impression,  and  as  far  as  their  doctrine  contains  anything 
original  it  may  most  conveniently  be  described  as  an  attempt  to 
rehabilitate  the  State.  Optimists  of  Bastiat's  genre  looked  upon 
the  State  as  the  very  incarnation  of  incapacity.  The  State  Socialists, 
on  the  other  hand,  regard  government  as  an  economic  agent  very 

1  "  Liberalism  only  recognises  one  task  which  the  State  can  perform,  namely, 
the  production  of  security."  (Quoted  by  Schonberg,  Handbuch  der  polititchen 
Ockfmomie,  3rd  ed.,  vol.  i,  p.  61.  The  quotation  is  taken  from  Rentzsch'a  die. 
tionary,  articles  on  Freihandel  and  Handelsfreiheit.) 

1  "  Kultur  und  Wohlfahrtzweck  "  (Wagner,  Orundlegung,  p.  886.) 


440  STATE  SOCIALISM 

similar  to  other  agents  which  the  community  employs,  only  a  little 
more  sympathetic  perhaps.  Much  of  their  argument  consists  of  an 
attempt  to  create  a  presumption  in  favour  of  government  as  against 
the  ordinarily  accepted  opinion  which  individualism  had  begotten. 
Such  was  the  nature  of  the  task  which  they  undertook. 

Their  first  action  was  to  insist  upon  the  weaknesses  of  individuals. 
Following  in  the  wake  of  Sismondi  and  other  socialists,  they 
emphasised  the  social  inconveniences  of  competition,  which  is, 
however,  generally  confused  with  individual  liberty.1  They  also 
insisted  upon  the  social  inequality  of  masters  and  workers  when  it 
comes  to  a  question  of  wage-bargaining — a  fact  that  had  already 
been  noted  by  Adam  Smith — as  well  as  upon  the  universal  opposition 
that  exists  between  the  weak  and  the  strong.  The  inadequacy  of 
merely  individual  effort  to  satisfy  certain  collective  wants  is  another 
fact  that  was  considerably  emphasised. 

As  far  back  as  the  year  1856  Dupont-White,  a  Frenchman, 
had  complained  bitterly  that  all  the  paths  of  civilisation  remained 
closed  merely  because  of  the  existence  of  one  obstacle — the  infirmity 
and  malignity  of  the  individual.2  He  also  attempted  to  show  how 
the  collective  interests  of  modern  society  are  becoming  increasingly 
complex  in  character  and  of  such  magnitude  as  to  be  utterly  beyond 
the  compass  of  individual  thought.3  "  There  are,"  says  he  in  that 
excellent  formula  in  which  he  summarises  the  instances  in  which 
State  intervention  may  be  necessary,  "  certain  vital  things  which 
the  individual  can  never  do,  either  because  he  has  not  the  necessary 
strength  to  perform  them  or  because  they  would  not  pay  him ;  or, 
again,  because  they  require  the  co-operation  of  everybody,  which 
can  never  be  got  merely  by  common  consent.  The  State  is  the  one 
person — the  entrepreneur — who  can  undertake  such  tasks."  *  But 
his  words  went  unheeded. 

Writing  in  a  similar  vein,  Wagner  invokes  the  testimony  of 
history  in  support  of  his  State  doctrine,  showing  us  how  the  State's 
functions  vary  from  one  period  to  another,  so  that  one  never  feels 
certain  about  prescribing  limits  to  its  action.  Individual  interest, 
private  charity,  and  the  State  have  always  had  to  divide  the 
field  of  activity  between  them.  Never  has  the  first  of  these,  taken 
by  itself,  proved  sufficient,  and  in  all  the  great  modern  states  its 

1  Wagner,  Qrundlegung,  Srded.,  pp.  811  etseq. ;  839etseq.  The  State  Socialists 
have  a  habit  of  wrongfully  using  the  two  expressions  "free  competition"  and 
"  economic  liberty  "  as  if  they  were  synonymous  terms.  See  Orundlegung,  p.  97. 

1  Dupont-White,  Ulndividu  et  rfitat,  6th  ed.,  p.  9.  •  Ibid.,  p.  267. 

•  Preface  to  Stuart  Mill's  Liberty. 


PROPERLY  so  CALLED  441 

place  is  taken  by  State  action.  To  conclude  that  this  solution 
was  useful  and  necessary  and  in  accordance  with  the  true  law  of 
historical  development  only  involved  one  further  step.*  One 
almost  unconsciously  proceeds  from  the  mere  statement  of  a  fad 
to  the  definite  formulation  of  a  law.  "  Anyone,"  says  Wagner, 
"who  has  appreciated  the  immanent  tendencies  of  evolution  (i.e. 
the  essential  features  of  economic,  social,  or  political  evolution) 
may  very  properly  proceed  from  such  a  historical  conception  of 
social  evolution  to  the  formulation  of  postulates  relative  to  what 
ought  to  be."  2  In  virtue  of  this  conception  there  is  a  demand  for 
the  extension  of  the  State's  functions,  which  may  easily  be  justified 
on  the  ground  of  its  capacity  for  furthering  the  well-being  and  civilisa- 
tion of  the  community.  The  influence  of  Rodbertus's  thought, 
especially  his  theory  concerning  the  development  of  governmental 
organs  to  meet  the  needs  of  a  higher  social  development,3  is  quite 
unmistakable  in  this  connection. 

The  similarity  between  his  views  and  those  of  Dupont- White, 
though  entirely  fortuitous,  perhaps,  is  sufficiently  remarkable  to 
justify  our  calling  attention  to  it.  White  is  equally  emphatic  in 
his  demand  that  the  State  should  exercise  charity  and  act  bene- 
ficently.4 He  shows  how  the  modern  State  has  extended  its 
dominion,  substituting  local  government  for  class  dominion  and 
parental  despotism,  taking  women,  children,  and  slaves  successively 
under  its  care,  and  adding  to  its  duties  and  responsibilities  in 
proportion  as  civilisation  grows  and  liberty  broadens  downward. 
Fresh  life  requires  more  organs,  new  forces  demand  new  regulations. 
But  the  ruler  and  the  organ  of  society  is  the  State.5  In  a  moment 
of  enthusiasm  he  even  goes  so  far  as  to  declare  that  "  the  State 
is  simply  man  minus  his  passions ;  man  at  such  a  stage  of  develop- 
ment that  he  can  commune  even  with  truth  itself,  fearing  neither 
God  nor  his  own  conscience.  However  imperfect  it  may  be,  the 
State  is  still  vastly  superior  to  the  individual."  *  Such  writing  is 
not  without  a  touch  of  mysticism. 

Without  going  the  extent  of  admitting,  as  M.  Wagner  would 
have  us  do,  that  the  simple  demonstration  of  the  truth  of  historical 
evolution  is  enough  to  justify  his  policy,  we  must  commend  State 

Wagner,  Qrundlegung,  3rd  ed.,  pp.  892  et  seq. 

Finanzwisaenscha/t  und  Staatssozialismits,  p.  106, 

See  supra,  p.  430. 

Dupont-White,  Capital  et  Travail,  p.  353  (1847);   L'Individu   et  L'filat, 
p.  81. 

Ulndividu  et  VEtot,  p.  65, 

Ibid.,  pp.  163,  164. 
K.D.  * 


442  STATE  SOCIALISM 

Socialist/!  for  the  service  it  has  performed  in  combating  the  Liberal 
contempt  for  government.  If  we  admit  the  right  of  a  central 
power  •  to  regulate  social  relations,  it  is  difficult  to  understand 
why  certain  economic  relations  only  should  be  subjected  to  such 
supervision. 

But  the  real  difficulty,  even  when  the  principle  is  fully  recognised, 
is  to  define  the  spheres  that  should  respectively  belong  to  the  State 
and  to  the  individual.  How  far,  within  what  limits,  and  according 
to  what  rules  should  the  State  intervene?  We  must  at  any  rate, 
as  Wagner  says,  begin  with  a  rough  distribution  of  attributes.  It 
is  impossible  to  proceed  by  any  other  method  unless  we  are  to 
assume,  as  the  collectivists  seem  to  do,  a  radical  change  in  human 
psychology  resulting  in  the  complete  substitution  of  a  solicitude 
for  the  public  welfare  for  private  interest. 

Dupont- White  thought  the  problem  insoluble,1  and  Wagner  is 
equally  emphatic  about  the  impossibility  of  formulating  an  absolute 
rule.  The  statesman  must  decide  each  case  on  its  merits.  He 
does,  however,  lay  down  a  few  general  rules.  As  a  first  general 
principle  it  is  clear  that  the  State  can  never  completely  usurp  the 
place  of  the  individual.2  It  can  only  concern  itself  with  the  general 
conditions  of  his  development.  The  personal  activity  of  the  individual 
must  for  ever  remain  the  essential  spring  of  economic  progress. 
The  principle  is  apparently  the  same  as  Stuart  Mill's,  but  there  is 
quite  a  marked  difference  between  them.  Mill  wished  to  curtail 
individual  effort  as  little  as  possible,  Wagner  to  extend  Government 
action  as  much  as  he  could.  Mill  insists  throughout  upon  the  nega- 
tive role  of  Government ;  Wagner  emphasises  the  positive  side,  and 
claims  that  it  should  help  an  ever-increasing  proportion  of  the 
population  to  share  in  the  benefits  of  civilisation.  No  inconvenience, 
Wagner  thinks,  would  result  from  a  little  more  communism  in  our 
social  life.  "  National  economy  should  be  transferred  from  the  con- 
trol of  the  individual  to  the  control  of  the  community  in  general," 
he  writes,  in  a  sentence  that  might  have  been  borrowed  directly 

1  "  No  means  has  as  yet  been  suggested  which  will  help  to  delimit  the 
functions  of  the  State  from  those  of  the  individual.  But  that  is  not  a  considera- 
tion of  any  great  moment,  for  we  can  always  arrange  matters  so  as  to  make  them 
balance  roughly  when  it  comes  to  a  particular  case."  (Ulndividu  et  I'Stat,  pp. 
298  and  301.)  Elsewhere  (in  his  preface  to  Mill's  Liberty)  he  gives  it  as  his 
opinion  that  such  a  delimitation  is  impossible,  and  that  when  we  are  speaking 
of  the  State  and  the  individual  we  are  speaking  of  two  distinct  powers,  such  as 
.  life  and  law  (p.  vii).  Law  has  to  follow  in  the  footsteps  of  life,  reproving  its 
excesses  and  correcting  its  faults  (p.  xiii). 

•  Wagner,  Omndlegung,  p.  887. 


PROPERLY  so  CALLED  443 

from  Rodbertus.1  Both  he  and  Mill  are  agreed  that  the  limit  of  Govern- 
ment action  must  be  placed  just  at  that  point  where  it  threatens  to 
cramp  individual  development.8 

The  practical  application  of  these  ideas  would  affect  both  the 
production  and  the  distribution  of  wealth.  But  on  this  question 
State  Socialism  has  done  little  more  than  seize  hold  of  ideas  that 
were  current  long  before  its  day. 

In  the  matter  of  distribution  it  takes  exactly  the  same  stand- 
point as  Sismondi.  There  is  no  condemnation  either  of  profits  or 
interest  as  a  matter  of  principle,  such  as  is  the  case  with  the  Socialists, 
nor  is  there  any  suggestion  of  doing  away  with  private  property  as 
the  fundamental  institution  of  society ;  but  there  is  the  expression 
of  a  desire  for  a  more  exact  correspondence  between  income  and 
effort  3  and  for  such  a  limitation  of  profits  as  the  economic  con- 
juncture will  allow  of,  and,  on  the  other  hand,  for  such  an  increase 
of  wages  as  will  permit  of  a  more  humane  existence.  It  is  impossible 
to  disguise  the  fact  that  all  this  sounds  very  vague.4 

The  State  would  thus  undertake  to  see  that  distribution  con- 
formed to  the  moral  sentiment  of  each  period.  Taxation  was  to  be 
employed  as  the  instrument  of  such  reforms.  Dupont- White,  in 
his  Capital  et  Travail,6  which  was  written  as  early  as  the  year 

1  State  enterprise  is  to  be  recommended  wherever  possible,  "  not  only  for 
specific  reasons  which  make  the  State  ownership  of  certain  industries  highly 
desirable,  but  also  for  reasons  of  social  policy,  such  as  the  advisability  of  helping 
industry  to  pass  from  a  regime  of  individual  ownership  to  that  of  communal 
control."  (Finanzwissenschaft  und  Staatssozialismus,  p.  115.) 

1  Dupont-White's  individualism  is  as  unimpeachable  as  Wagner's,  which 
proves  that  an  individualist  need  not  always  be  a  Liberal.  "  The  author  of 
Liberty"  says  he  in  his  preface  to  Mill's  Liberty,  p.  Ixxxix,  "  has  a  keen  sympathy 
for  individualism,  which  I  share  to  the  full,  though  without  any  misgivings  as  to 
the  future  destiny  of  this  unalterable  element.  Individualism  is  life.  In  that 
sense  individualism  is  imperishable." 

3  Cf.,  for  example,  Schmoller's   open  letter   to  von   Treitschke   (1874-75), 
translated  in  his  Politique  sociale  et  Economic  politique  (Paris,  1902).    To  the 
objection  that  the  civil  list  of  European  monarchs  is  condemned  in  principle 
Schmoller  replies  that  he  is  "  speaking  of  the  average  man,"  but  that  "  the  Hohen- 
zollerns,  when  considered  in  this  light,  have  no  more  than  they  deserve  "  (p.  92). 
We  suspect  that  this  argument  will  not  carry  much  weight  outside  Germany. 

4  Wagner  recognises  the  arbitrary  nature  of  his  suggestions.     Theoretically, 
he  says,  this  method  of  procedure  is  quite  legitimate,  but  practically  it  is  not  so 
simple,  "  for  the  object,  in  short,  is  to  employ  the  principles  of  equity  and  of  social 
utility,  which  are  by  no  means  difficult  to  formulate,  and  to  transmute  those 
principles  into  legislative  enactments,  so  as  to  put  a  check  upon  the  arbitrary 
and  excessive  accumulation  of  wealth  in  the  hands  of  a  few  individuals,  such  at 
is  the  case  under  a  regime  of  free  competition."    (Finanzuriasenschaft  und  Stoats- 
sozialismut,  p.  719.)  '  P.  398. 


444  STATE  SOCIALISM 

1847,  had  hit  upon  the  precise  formula  in  which  to  describe  these 
projects  :  "  To  levy  a  tax  such  as  will  strike  the  higher  classes  and 
to  apply  the  yield  to  help  and  reward  labour."  Wagner  says  just 
the  same  thing.  "  Logically  State  Socialism  must  undertake  two 
tasks  which  are  closely  connected  with  one  another.  In  the  first 
place  it  must  raise  the  lower  strata  of  the  working  classes  at  the 
expense  of  the  higher  classes,  and  in  the  second  place  it  must  put 
a  check  upon  the  excessive  accumulation  of  wealth  among  certain 
strata  of  society  or  by  certain  members  of  the  propertied  classes."  x 

In  the  matter  of  production  State  Socialism  has  simply  been 
content  to  reproduce  the  list  given  by  Mill,  Chevalier,  and  Cournot 
of  the  cases  in  which  there  is  no  economic  principle  against  the 
direct  control  or  management  of  an  industrial  enterprise  by  the 
State.  Speaking  generally,  Wagner  is  of  the  opinion  that  the  State 
should  take  upon  itself  the  control  of  such  industries  as  are  of  a 
particularly  permanent  or  universal  character,  or  such  as  require 
either  uniform  or  specialised  methods  of  control  or  are  likely  to 
become  monopolies  in  the  hands  of  private  individuals.  The  same 
argument  would  apply  to  industries  satisfying  some  general  want, 
but  in  which  it  is  almost  impossible  to  determine  the  exact  advantage 
which  the  consumer  derives  from  them.  The  State  administration 
of  rivers,  forests,  roads,  and  canals,  the  nationalisation  of  railways 
and  banks,  and  the  municipalisation  of  water  and  gas,  are  justified 
on  the  same  grounds. 

Such  are  the  essential  features  of  State  Socialism,  which  bases  its 
appeal,  not  on  any  precise  criticism  of  property  or  of  unearned 
income,  such  as  we  are  accustomed  to  get  from  the  socialists,  but 
entirely  upon  moral  and  national  considerations.  A  juster  distribu- 
tion of  wealth  and  a  higher  well-being  for  the  working  classes 
appear  to  be  the  only  methods  of  maintaining  that  national  unity 
of  which  the  State  is  the  representative.  But  it  neither  specifies 
the  rules  of  justice  nor  indicates  the  limits  of  the  ameliorative 
process.  The  fostering  of  collective  effort  affords  another  means 
of  developing  moral  solidarity  and  of  limiting  purely  selfish  action ; 
but  the  maintenance  of  private  property  and  individual  initiative 
seemed  indispensable  to  the  growth  of  production — a  consideration 
which  renders  it  inimical  to  collectivism.  Its  moral  character 
explains  the  contrast  between  the  precise  nature  of  some  of  its 
positive  demands  and  the  somewhat  vague  character  of  its  general 
principles,  which  may  be  applied  to  a  greater  or  lesser  extent  accord- 
ing to  individual  preferences.  It  is  impossible  to  deny  the  essentially 
1  Finanzvrisaenschaft  und  Staatssozialitmu*,  p.  718. 


PROPERLY  so  CALLED  445 

subjective  character  of  its  criteria,  and  this  affords  some  indication 
of  the  vigorous  criticism  offered  by  the  economists,  who  are  above 
all  anxious  for  scientific  exactitude,  and  the  measure  of  enthusiasm 
with  which  it  has  been  welcomed  by  all  practical  reformers.  It 
forms  a  kind  of  cross-roads  where  social  Christianity,  enlightened 
conservatism,  progressive  democracy,  and  opportunistic  socialism  all 
come  together. 

But  its  success  was  due  not  so  much  to  the  value  of  its  principles 
as  to  the  peculiar  nature  of  the  political  and  economic  evolution 
toward  the  end  of  the  century.  Its  most  conspicuous  representa- 
tive in  Germany  was  Prince  Bismarck,  who  was  totally  indifferent 
to  any  theory  of  State  Socialism,  and  who  preferred  to  justify 
his  policy  by  an  appeal  to  the  principles  of  Christianity  or  the 
Prussian  Landrecht.1  One  of  his  great  ambitions  was  to  con- 
solidate and  cement  the  national  unity  which  he  had  succeeded 
in  creating.  A  system  of  national  insurance  financed  and  controlled 
by  the  State  appealed  to  him  as  the  best  way  of  weaning  the  working 
classes  from  revolutionary  socialism  by  giving  them  some  positive 
proof  of  the  sympathy  of  the  Government  in  the  shape  of  pecuniary 
interest  in  the  welfare  of  the  empire.  In  a  somewhat  similar  fashion 
the  French  peasant  became  attached  to  the  Revolution  through  the 
sale  of  national  property.  "  I  consider,"  says  Bismarck,  speaking 
of  invalidity  insurance,  "  that  it  is  a  tremendous  gain  for  us  to 
have  700,000  annuitants  among  the  very  people  who  think  they 
have  nothing  to  lose,  but  who  sometimes  wrongly  imagine  that 
they  might  gain  something  by  a  change.  These  individuals  would 
lose  anything  from  115  to  200  marks,  which  just  keeps  them  above 
water.  It  is  not  much,  perhaps,  but  it  answers  the  purpose  admir- 
ably." J  Such  was  the  origin  of  those  important  laws  dealing 
with  sickness,  accidents,  invalidity,  and  old  age  which  received 

1  The  imperial  message  of  November  17,  1881,  announcing  the  celebrated 
series  of  Insurance  Acts  admits  the  necessity  for  a  more  marked  policy  of  State 
intervention :  "To  lay  hold  of  the  ways  and  means  whereby  the  working  classes 
may  best  be  helped  is  by  no  means  an  easy  task,  but  it  is  one  of  the  highest  which 
a  moral  and  Christian  community  can  set  its  heart  upon."  Bismarck,  in  hi? 
speech  of  May.  9, 1884,  said  :  "  I  unhesitatingly  recognise  the  righte  of  labour,  and 
so  long  as  I  occupy  this  place  I  shall  uphold  them.  In  so  doing  I  base  my  plea, 
not  upon  socialism,  but  upon  the  Prussian  Landrecht."  Section!?  of  Art.  XIX  of  the 
second  part  of  the  Prussian  Landrecht  (February  5, 1794)  reads  as  follows  :  "  To 
such  as  have  neither  the  means  nor  the  opportunity  of  earning  their  own  liveli- 
hood or  that  of  their  family,  work  shall  be  given,  adapted  to  their  strength  and 
capacity."  Despite  its  general  tone,  it  did  not  contemplate  giving  relief. 

1  Speech  delivered  on  March  18,  1889,  quoted  by  Brodnitz,  Bitmarcka 
Notional&konomische  Ansichten,  p.  141  (Jena,  1902). 


446  STATE  SOCIALISM 

the  imperial  seal  between  1881  and  1889.  But  just  because  the 
Chancellor  did  not  consider  that  there  was  the  same  pecuniary 
advantage  to  be  derived  from  labour  laws  in  the  narrow  sense  of 
the  term — that  is,  in  laws  regulating  the  duration  of  labour,  Sunday 
rest,  the  inspection  of  factories,  etc. — he  was  less  favourably  inclined 
towards  their  extension.  The  personal  predilection  of  the  Emperor 
William  II,  as  expressed  in  the  famous  decrees  of  February  4,  1890, 
was  needed  to  give  the  Empire  a  new  impetus  in  this  direction. 

Accordingly  it  was  the  intelligent  conservatism  of  a  Government 
almost  absolute  in  its  power,  but  possessed  of  no  definitely  social 
creed,  that  set  about  realising  a  part  of  the  programme  of  the  State 
Socialists.  In  England  and  France  and  the  other  countries  where 
political  liberty  is  an  established  fact  similar  measures  have  been 
carried  out  at  the  express  wish  of  an  awakening  democracy.  The 
working  classes  are  beginning  to  find  out  how  to  utilise  for  their 
own  profit  the  larger  share  of  government  which  they  have  recently 
secured.  Progressive  taxation,  insurance,  protective  measures  for 
workmen,  more  frequent  intervention  of  Government  with  a  view 
to  determining  the  conditions  of  labour,  are  just  the  expressions 
of  a  tendency  that  operates  independently  of  any  preconceived  plan. 

The  regulation  of  the  relationship  between  masters  and  work- 
men gave  to  State  Socialism  a  legislative  bias.  Governments  and 
municipalities  have  long  since  extended  their  intervention  to  the 
domain  of  production,  the  new  character  of  social  life  rather  than 
any  social  theory  being  again  the  determining  motive.  Public 
works,  such  as  canals,  roads,  and  railways,  have  multiplied  enor- 
mously in  the  course  of  the  nineteenth  century,  thanks  to  the 
existence  of  new  productive  forces.  The  demand  for  public  services 
has  increased  because  of  the  increasing  concentration  of  population. 
Communal  life  keeps  encroaching  upon  what  was  formerly  an 
isolated,  dispersive  existence,  and  community  of  interest  is  extending 
its  sway  in  village  and  borough  as  well  as  in  the  great  city  and  the 
nation  at  large.  Industry  also  is  being  gradually  linked  together,  and 
,  the  area  of  free  competition  is  perforce  becoming  narrower.  In  the 
labour  market,  as  well  as  in  the  produce  and  the  money  markets, 
concentration  has  taken  the  place  of  dispersion.  Monopoly  is 
everywhere.  Collective  enterprise,  instead  of  being  the  exception, 
tends  to  be  the  rule,  and  public  opinion  is  gradually  being  reconciled 
to  the  idea  of  seeing  the  State — the  "  collective  being  "par  excellence 
— becoming  in  its  turn  industrial. 

Under  conditions  such  as  these  it  was  impossible  that  the 
doctrine  of  State  Socialism  should  not  influence  public  opinion. 


PROPERLY  so  CALLED  447 

State  Socialism  has  the  peculiar  merit  of  being  able  to  translate 
the  confused  aspirations  of  a  new  epoch  in  the  history  of  politics  and 
economics  into  practical  maxims  without  arousing  the  suspicions 
of  the  public  to  the  extent  that  socialism  generally  does.  Legis- 
lators and  public  men  generally  have  been  supplied  with  the  necessary 
arguments  with  which  to  defend  the  inauguration  of  that  new  policy 
upon  which  they  had  secretly  set  their  hearts.  A  common  ground 
of  action  is  found  for  parties  that  are  generally  opposed  to  one 
another  and  for  temperaments  that  are  usually  incompatible.  That 
is  the  outstanding  merit  of  a  doctrine  that  seems  eminently  suitable 
for  the  attainment  of  tangible  results. 

And  so  by  a  curious  inversion  of  functions  by  no  means  excep- 
tional in  the  history  of  thought,  State  Socialism  at  the  end  of  the 
century  finds  itself  playing  the  part  of  its  great  adversary,  the 
Liberal  Optimism  of  the  early  century.  One  of  the  outstanding 
merits  of  that  earlier  Liberalism  was  the  preparation  it  afforded  for 
a  policy  of  enfranchisement  or  liberty,  which  was  absolutely  necessary 
for  the  development  of  the  industrial  regime.  And  so  it  became  the 
interpreter  of  the  great  economic  currents  of  the  time.  In  pursuance 
of  this  exclusive  task  all  traces  of  its  scientific  origin  disappeared, 
the  elaboration  of  economic  theory  was  neglected,  and  the  habit  of 
close  reasoning  so  essential  to  systematic  thinking  was  Abandoned. 
In  a  somewhat  similar  manner  State  Socialism  has  become 
the  creed  of  all  those  who  desire  to  put  an  end  to  the  abuses 
of  economic  liberty  in  its  extremer  aspects,  or  such  as  are  generally 
concerned  about  the  miserable  condition  of  an  increasing  number 
of  the  working  classes.  Absorbed  in  immediate  matters  of  this 
kind,  the  promoters  of  State  Socialism  have  managed  to  influence 
practical  politics  without  shedding  much  light  upon  economic 
theory.  And  now  they  in  their  turn  find  their  system  threatened 
by  the  fate  which  awaits  all  political  doctrines.  Even  at  the  present 
moment  one  is  tempted  to  ask  whether  this  growing  multiplicity  of 
State  function  is  not  in  danger  of  arousing  on  the  part  of  consumers, 
entrepreneurs,  and  workmen  a  general  feeling  of  contempt  for  the 
economic  capacity  of  the  State. 

In  conclusion,  we  must  note  another  characteristic  fact.  Whereas 
during  the  greater  part  of  the  nineteenth  century  the  attacks  of 
Socialism  were  directed  against  Liberalism  and  economic  orthodoxy, 
Neo-Marxian  syndicalism  is  concentrating  its  attention  almost 
exclusively  upon  State  Socialism.  Sorel  emphasises  the  similarity 
that  exists  between  Marxism  and  Manchesterism,  and  on  more 
then  one  point  he  finds  himself  in  agreement  with  a  "  Liberal " 


448  STATE  SOCIALISM 

like  Pareto.  On  the  other  hand,  no  words  are  sufficiently  vigorous 
to  express  his  condemnation  of  the  partisans  of  social  peace  and 
interventionism,  which  appear  to  him  to  corrupt  the  working  classes. 
Syndicalist  working  men  have  on  more  than  one  occasion  shown 
their  contempt  for  the  State  by  refusing  to  avail  themselves  of 
measures  passed  on  their  behalf — old-age  pensions,  for  example. 
This  attitude  is  perhaps  due  to  the  influence  of  the  anarchists  upon 
the  leaders  of  French  syndicalism. 

The  fusion  of  these  two  currents  of  ideas — the  Neo-Marxian  and 
the  anarchist — and  their  effect  in  turning  the  attention  of  the  French 
working  classes  away  from  State  Socialism,  is  an  interesting  fact 
whose  political  results  will  by  no  means  prove  negligible.1 

1  The  well-known  German  economist  Professor  Lexis  has  unfortunately  not 
been  mentioned  in  this  chapter,  for  the  GSttingen  professor  has  the  misfortune 
of  being  neither  a  State  Socialist  nor  a  member  of  the  Historical  school.  Hia 
works,  dealing  with  various  topics — money,  the  population  theory,  and  general 
economic  theory — are  scattered  through  a  number  of  reviews  and  other  publica- 
tions, especially  the  Jahrbucher  fur  Nationaldkonomie  und  Statistik,  Schonberg'a 
Handbuch,  and  the  great  Handwarterbuch  der  Staatswi&stnschaften.  His  writings 
are  distinguished  not  only  by  a  definitely  scientific  method  of  treatment,  but 
also  by  a  remarkable  clearness  of  thought.  While  appearing  to  continue  the 
tradition  of  the  Classical  school,  he  takes  care  to  reject  the  optimistic  conclusions 
which  are  too  often  regarded  as  an  inseparable  element  of  that  tradition.  In 
1900  Lexis  gave  us  a  general  resume  of  his  teaching  in  the  AUgemeine  Volks- 
tvirtschaftslehre,  where  he  treats  of  the  economic  world  as  concerned  merely 
with  the  circulation  of  goods.  In  addition  to  an  interesting  theory  of  crises, 
upon  which  we  cannot  dwell  just  now,  the  most  original  part  of  the  work  consists 
of  a  theory  concerning  the  method  of  distributing  the  social  product  between 
workers  and  capitalists.  Lexis  thinks  that  all  material  goods  are  produced  by 
labour  and  measurable  in  terms  of  labour.  The  problem  then  is  to  determine 
where  the  capitalist  gets  his  income.  The  capitalist's  profit  is  not  the  result  of 
exploitation,  as  Marx  thought,  but  is  simply  what  is  added  to  the  sale  price — a 
sum  corresponding  to  the  capitalist's  interest  is  added  to  the  sum  representing 
the  workmen's  wages.  Profit  originates  in  the  sphere  of  circulation.  But  how 
will  this  increased  sale  price  benefit  the  capitalists,  seeing  that  under  existing 
conditions  the  workers  can  only  buy  the  equivalent  of  the  products  which  they 
have  already  helped  to  produce  ?  We  need  to  remember,  however,  that  they 
produce  for  the  capitalist  as  well  as  for  themselves,  and  with  the  money  thus 
obtained  the  working  classes  are  enabled  to  buy  whatever  they  need  at  market 
prices,  i.e.  at  a  price  that  includes  interest,  which  constitutes  the  capitalist's 
profit.  Whenever  the  capitalists  themselves  purchase  goods  made  by  them- 
selves they  are  reciprocally  benefiting  one  another.  Their  class  position  is  not 
modified  by  such  procedure,  for  each  entrepreneur  simply  draws  profits  in  propor- 
tion to  his  capital.  And  so  we  avoid  the  most  serious  objection  which  can  be 
raised  to  Marx's  theory.  This  explanation  of  the  surplus  value  received  by 
the  capitalists  is  at  least  very  ingenious.  Lexis  has  been  mostly  influenced 
by  Marx  and  Rodbertus,  and  has  attempted  a  fusion  of  their  more  vigorous 
conceptions.  Despite  the  objections  that  might  be  raised  to  it,  the  work  it 
certainly  one  of  the  most  original  of  recent  years. 


MARXISM  449 


CHAPTER  III:  MARXISM 

I:   KARL  MARX1 

EVERYONE  knows  of  the  spell  cast  over  the  socialism  of  the  last 

forty  years  by  the  doctrines  of  Karl  Marx  and  the  contempt  with 

1  Karl  Marx,  generally  spoken  of  as  a  Jew,  was  born  on  May  5,  1818,  of 
Jewish  parents  who  had  been  converted  to  Protestantism.  Born  of  a  respect- 
able bourgeois  family  and  wedded  to  the  daughter  of  a  German  baron,  few 
would  have  predicted  for  him  the  career  of  a  militant  socialist.  Such  was  to  be 
his  lot,  however.  In  1843,  at  the  age  of  twenty -five,  the  authorities  having 
suppressed  a  newspaper  which  he  was  conducting,  he  fled  to  Paris,  and  thence 
to  Brussels.  Returning  to  Germany  during  the  Revolution  of  1848,  in  which 
he  took  an  active  part,  he  was  again  expelled,  and  this  time  took  refuge  in  London 
(1849).  Here  he  spent  the  rest  of  his  life  (about  thirty  years),  leaving  for  Franco 
a  short  time  before  his  death  in  1883.  He  died  at  London  on  March  14  in  that  year. 

Although  Marx  was  one  of  the  founders  and  directors  of  the  famous  associa- 
tion known  as  the  "  International,"  which  was  the  terror  of  every  European 
Government  between  1863  and  1872,  he  was  not  a  mere  revolutionary  like  his 
rival  Bakunin,  nor  was  he  a  famous  tribune  of  the  people  like  Lassalle.  He 
was  essentially  a  student,  an  affectionate  father,  like  Proudhon,  an  indefatigable 
traveller,  and  a  man  of  great  intellectual  culture. 

The  best  known  of  his  works,  which  is  frequently  quoted  but  seldom  read, 
is  Das  Kapital,  of  which  the  first  volume — the  only  one  publkhed  during  his  life- 
time— appeared  in  1867.  The  other  two  volumes  were  issued  after  his  death, 
in  1885  and  1894,  through  the  efforts  of  his  collaborator  Engels. 

This  book  has  exercised  a  great  influence  upon  nineteenth-century  thought, 
and  probably  no  work,  with  the  exception  of  the  Bible  and  the  Pandects,  has  given 
rise  to  such  a  host  of  commentators  and  apologists.  Marx's  other  writings,  though 
much  less  frequently  quoted,  are  also  exceedingly  important,  especially  La 
Miser  e  de  la  Philosophic,  published  in  1847  in  answer  to  Proudhon's  Les  Contra- 
dictions Sconomiques ;  Zur  Kritik  der  politischen  Oekonomie  (1869);  and  par- 
ticularly the  Communist  Manifesto,  published  in  January  1848.  The  Manifesto 
is  merely  a  pamphlet,  and  at  first  it  attracted  scarcely  any  attention,  but  Labriola 
goes  so  far  as  to  say — not  without  some  exaggeration,  perhaps- -that  "  the  date  of 
its  publication  marks  the  beginning  of  a  new  era  "  (Essai  eur  la  C  nception 
materialiste  de  VHistoire,  p.  81).  At  any  rate,  it  is  the  breviary  of  modern 
socialism.  There  is  scarcely  a  single  one  of  its  phrases,  each  of  which  stings  like 
a  dart,  that  has  not  been  invoked  a  thousand  times.  The  Programme  of  the 
Communist  Manifesto  is  included  in  Ensor's  Modern  Socialism. 

It  is  a  much -debated  question  as  to  whether  Karl  Marx  was  influenced  by 
French  socialists,  and  if  so  to  what  extent.  On  the  question  of  his  indebtedness 
to  Pecqueur  and  Proudhon  see  Bourgnin's  article  in  La  Revue  d'Sconomie  poli- 
tique,  1892,  on  Des  Rapports  entre  Proudhon  et  K.  Marx..  Proudhon's  work, 
at  any  rate,  was  known  to  him,  for  one  of  his  books  was  a  refutation  of  the 
doctrines  of  the  petit  bourgeois,  as  he  called  him.  Certain  analogies  between 
the  works  of  these  two  writers  to  which  we  shall  have  to  call  attention  will 
help  us  to  appreciate  the  extent  to  which  Marx  is  indebted  to  Proudhon.  Bat, 
as  Anton  Menger  has  pointed  out,  we  must  seek  Marx's  antecedents  among 


450  MARXISM 

which  this  newer  so-called  scientific  socialism  refers  to  the  earlier  of 
Utopian  kind.  But  what  is  even  more  striking  than  the  success  of 
Marxian  socialism  is  its  want  of  sympathy  with  the  heretical 
doctrines  of  its  predecessors  the  Communists  and  Fourierists,  and 
the  pride  it  takes  in  regarding  itself  as  a  mere  development  or 
rehabilitation  of  the  great  Classical  tradition. 

To  give  within  the  limits  of  a  single  chapter  a  risumi  of  a  doctrine 
that  claims  to  review  and  to  reconstruct  the  whole  of  economic 
theory  is  clearly  impossible,  and  we  shall  merely  attempt  an  exami- 
nation of  two  of  Marx's  more  essential  doctrines,  namely,  his 
theory  of  surplus  labour  and  value  and  his  law  of  automatic  appro- 
priation, more  familiarly  but  less  accurately  known  as  the  law  of 
concentration  of  capital.  The  first  is  based  upon  a  particular  con- 
ception of  exchange  value  and  the  second  upon  a  special  theory 
of  economic  evolution.  To  employ  Comtean  phraseology,  the  one 
belongs  to  the  realm  of  economic  statics,  the  other  to  the  domain 
of  economic  dynamics. 

1.  SURPLUS  LABOUR  AND  SURPLUS  VALUE 

The  laborious  demonstration  which  follows  will  become  clearer  if 
we  remind  ourselves  of  the  objects  Marx  had  in  view.  Marx's  aim  was 
to  show  how  the  propertied  class  had  always  lived  upon  the  labour  of 
the  non-propertied  classes — the  possessors  upon  the  non-possessing. 
This  was  by  no  means  a  new  idea,  as  we  have  already  made  its 
acquaintance  in  the  writings  of  Sismondi,  Saint-Simon,  Proudhon, 
and  Rodbertus.  But  the  essence  of  the  criticism  of  these  writers 
was  always  social  rather  than  economic,  the  institution  of  private 
property  and  its  injustice  being  the  chief  object  of  attack.  Karl 
Marx,  on  the  other  hand,  deliberately  directed  the  gravamen  of 
the  charge  against  economic  science  itself,  especially  against  the 
conception  of  exchange.  He  endeavours  to  prove  that  what  we 
call  exploitation  must  always  exist,  that  it  is  an  inevitable  outcome 
of  exchange — an  economic  necessity  to  which  both  master  and  man 
must  submit. 

It  is  convenient  to  begin  with  an  examination  of  economic  value. 
Marx  lays  down  the  doctrine  that  labour  is  not  merely  the  measure 

English  socialists,  in  the  works  of  writers  like  Thompson  especially.  Nor 
must  we  forget  his  friend  and  collaborator  Friedrich  Engels,  who  for  the  sake 
of  his  master  has  been  content  to  remain  in  the  background.  Engels  col- 
laborated in  the  publication  of  the  famous  Manifesto  in  1848,  and  it  was 
he  who  piously  collected  and  edited  Karl  Marx's  posthumous  work.  It  is 
difficult  to  know  exactly  what  part  he  played  in  the  development  of  Marx's  ideas, 
but  it  is  highly  probable  that  it  was  considerable. 


SURPLUS  LABOUR  AND  SURPLUS  VALUE   451 

and  cause  of  value,  but  that  it  is  also  its  substance.  We  have 
already  had  occasion  to  note  how  Ricardo  was  somewhat  favourably 
inclined  to  the  same  view,  though  hardly  willing  to  adopt  it.  There 
is  no  such  hesitation  on  the  part  of  Marx  :  it  is  all  accepted  in  a 
characteristically  thorough  fashion.  Of  course,  he  does  not  deny 
that  utility  is  a  necessary  condition  of  value  and  that  it  is  really  the 
only  consideration  in  the  case  of  "  value  in  use."  But  utility  alone 
is  not  enough  to  explain  value  in  exchange,  since  every  act  of 
exchange  implies  some  common  element,  some  degree  of  identity 
between  the  exchanged  commodities.  This  identity  is  certainly  not 
the  result  of  utility,  because  the  degree  of  utility  is  different  in  every 
commodity,  and  it  is  this  difference  that  constitutes  the  raison  d'etre 
of  exchange.  The  common  or  homogeneous  element  which  is 
contained  in  commodities  themselves  heterogeneous  in  character 
is  the  quantity  of  labour,  great  or  small,  which  is  contained  in  them. 
The  value  of  every  commodity  is  simply  the  amount  of  crystallized 
human  labour  which  it  contains,  and  commodities  differ  in  value 
according  to  the  different  quantities  of  labour  which  are  "  socially 
necessary  to  produce  them."  l 

Let  us  take  the  case  of  a  working  man,  an  employee  in  any 
kind  of  industry,  working  ten  hours  a  day. 

What  will  be  the  exchange  value  of  the  produce  of  his  labour  ? 
It  will  be  the  equivalent  of  ten  hours'  labour,  whether  the  com- 
modity produced  be  cloth  or  coal  or  what  not.  And  since  the 
master  or  the  capitalist,  as  Marx  always  calls  him,  in  accordance 
with  the  terms  of  the  wage  bargain,  reserves  for  himself  the  right  of 
disposing  of  that  commodity,  he  sells  it  at  its  real  value,  which  is 
the  equivalent  of  ten  hours'  labour. 

1  Mar*  calls  attention  to  the  fact  that  even  Aristotle  was  puzzled  by  this 
common  element  which  exchanged  objects  seemed  to  possess,  and  by  the  fact 
that  exchange  appeared  to  make  them  of  equal  value.  We  say  that  5  beds  — 
1  house.  "  What  is  that  equal  something,  that  common  substance,  which  admits 
®f  the  value  of  the  beds  being  expressed  by  a  house  ?  Such  a  thing,  in  truth, 
cannot  exist,  says  Aristotle.  And  why  not  T  Compared  with  the  beds  the 
house  does  represent  something  equal  to  them,  in  so  far  as  it  represents  what  is 
really  equal,  both  in  the  beds  and  the  house.  And  that  is — human  labour." 
(Kapital,  p.  29 ;  Moore  and  Aveling's  translation— to  which  the  Translator  is 
indebted  for  the  succeeding  quotations  also. 

"  If  we  make  abstraction  from  its  use-value  we  make  abstraction  at  the  same 
time  from  the  material  elements  and  shapes  that  make  the  product  a  use-value. 
...  Its  existence  as  a  material  thing  is  put  out  of  sight.  Neither  can  it  any 
longer  be  regarded  as  the  product  of  the  labour  of  the  joiner,  the  mason,  the 
spinner,  or  of  any  other  definite  kind  of  productive  labour  .  .  .  there  is  nothing 
left  but  what  is  common  to  them  all ;  all  are  reduced  to  one  and  the  same  sort 
of  labour — human  labour  in  the  abstract."  (Ibid.,  p.  6.) 


452  MARXISM 

The  worker  himself  is  cut  off  with  a  wage  which  simply  repre- 
sents the  price  which  the  capitalist  pays  for  his  labour  force  (Arbeits- 
kraft),  and  the  capitalist  reserves  to  himself  the  right  of  disposing 
of  the  commodity  at  his  own  good  pleasure.  Its  value  is  determined 
in  the  same  way  as  that  of  every  other  exchangeable  commodity. 
Labour-force  or  manual  labour  is  just  a  commodity,  and  its  value 
is  determined  by  the  number  of  hours  of  labour  necessary  for  its 
production.1 

"  The  quantity  of  labour  necessary  to  produce  the  labour- force  " 
is  a  somewhat  formidable  expression,  and  it  is  very  difficult  for  any 
one  who  is  beginning  a  study  of  Marx  to  appreciate  its  significance, 
but  it  is  very  essential  that  we  should  try,  since  everything  turns 
upon  a  clear  understanding  of  this  phrase.  But  it  is  really  not  so 
mysterious  after  all.  Suppose  that  instead  of  the  labour  of  an 
artisan  we  take  the  work  of  a  machine.  No  engineer  would  be 
surprised  if  we  asked  him  the  running  expenses  of  that  machine, 
and  he  might  reply  that  it  was  costing  one  or  two  tons  of  coal  per 
hour  or  eight  or  twelve  per  diem ;  and  since  the  value  of  the  coal 
merely  represents  a  certain  amount  of  human  labour  on  the  part 
of  the  coal-miner,  there  would  be  no  difficulty  in  expressing  it  in 
terms  of  labour.  Under  the  wage  system  the  labourer  is  simply  a 
machine,  differing  from  the  latter  merely  in  the  smaller  quantity 
of  wealth  which  he  produces.  The  value  of  an  hour's  labour  or  a 
day's  toil  can  be  measured  by  the  quantity  of  necessaries  required 
to  keep  the  worker  in  full  productive  efficiency  during  that  period. 
Every  employer  who  pays  wages  in  kind — which  is  still  the  case  in 
agriculture — always  makes  that  kind  of  calculation,  and  even  when 
the  worker  is  paid  a  money  wage  things  are  much  the  same,  for 
the  money  simply  represents  the  cost  of  those  necessaries. 

Let  us  proceed  a  step  farther.  The  value  of  the  commodities 
necessary  for  the  upkeep  of  labour  is  never  equal  to  the  value  of 
the  produce  of  that  labour.  In  the  instance  given  it  would  not  equal 
the  value  of  ten  hours'  labour — perhaps  not  even  five.  Human 

1  "  The  capitalist  epoch  is  therefore  characterized  by  this,  that  labour-power 
takes  in  the  eyes  of  the  labourer  himself  the  form  of  a  commodity  which  is 
his  property  ;  his  labour  consequently  becomes  wage-labour.  .  .  .  Given  the 
individual,  the  production  of  labour-power  consists  in  his  reproduction  of  himself 
or  his  maintenance.  For  his  maintenance  he  requires  a  given  quantity  of  the 
means  of  subsistence.  Therefore  the  labour -time  requisite  for  the  production 
of  labour -power  reduces  itself  to  that  necessary  for  the  production  of  those 
means  of  subsistence  :  in  other  words,  the  value  of  labour -power  is  the  value 
of  the  means  of  subsistence  necessary  for  the  maintenance  of  the  labourer." 
(Kapital,  p.  149.) 


SURPLUS  LABOUR  AND  SURPLUS  VALUE    458 

labour  under  normal  conditions  always  produces  more   than  the 
mere  value  of  the  goods  consumed.1 

This  is  the  crux  of  the  problem.  The  mystery  surrounding 
capitalist  production  is  at  last  solved.  The  value  produced  by  the 
labourer  passes  into  the  hands  of  the  capitalist,  who  disposes  of  it 
and  gives  back  to  the  labourer  enough  to  pay  for  the  food  con- 
sumed by  him  during  the  time  he  was  producing  the  commodity. 
The  difference  goes  into  the  capitalist's  pocket.  The  product  is 
sold  as  the  equivalent  of  ten  hours'  labour,  but  the  labourer 
receives  the  equivalent  of  five  hours  only.  Marx  speaks  of  this  as 
surplus  value  (Mehrwerth),  a  term  that  has  become  exceedingly 
popular  since.2 

Thus  the  capitalist  gets  ten  hours'  labour  out  of  the  work- 
man and  only  pays  him  for  five,3  the  other  five  hours  costing 
him  nothing  at  all.  During  the  first  five  hours  the  workman  produces 
the  equivalent  of  his  wages,  but  after  the  end  of  the  fifth  hour  he 
is  working  for  nothing.  The  labour  of  this  extra  number  of  hours 
during  which  the  surplus  value  is  being  produced  and  for  which  the 
worker  receives  nothing  Marx  calls  surplus  labour.  By  that  he 

1  This  demonstration  implies  that  the  wages  drawn  by  the  worker  is  neces- 
sarily only  just  equal  to  the  value  of  the  means  of  his  subsistence.  It  is  the 
old  classic  law  of  Tu;  got  and  Ricardo  over  again,  which  Lassalle,  Marx's  con- 
temporary and  rival,  graphically  called  the  "brazen  law  of  wages."  We  are  simply 
given  a  more  scientific  demonstration  of  it,  that  is  all. 

The  demonstration  is  based  upon  a  postulate  which  ought  first  to  have  been 
proved,  namely,  that  the  quantity  of  labour  necessary  to  keep  the  worker  alive 
is  always  less  than  the  quantity  which  he  provides  for  his  master.  But  what 
is  there  to  prove  that  a  man  who  works  ten  hours  a  day  does  not  require  all 
those  ten  hours  to  produce  sufficient  for  his  upkeep  7  Is  there  some  natural 
law  that  supports  this  contention  ?  Marx  simply  regards  it  as  an  axiom  and 
attempts  no  proof.  Everyone  would  admit  it  to  be  true  in  a  general  way — 
as  a  kind  of  empirical  law.  For  were  it  true  that  man's  labour  was  wholly 
absorbed  by  the  necessaries  of  life  there  would  be  no  increase  of  numbers,  no 
saving  of  capital,  and  civilisation,  which  is  the  product  of  leisure,  would  never 
have  been  possible. 

What  we  have  here  is  the  Fhysiocratio  "  net  product  "  once  again,  with  this 
difference,  that  instead  of  being  confined  to  agricultural  labour  it  in  now  regarded 
as  an  attribute  of  labour  of  every  kind. 

*  See  p.  184  for  what  is  said  of  Sismondi  and  his  conception  of  "  increment 
value." 

8  It  is  necessary  to  point  out  that  this  proportion,  which  gives  half  the  value 
to  hand  labour,  leaving  100  per  cent,  surplus  value,  is  put  forward  merely  for 
the  sake  of  illustration.  Some  Marxians,  however,  among  whom  is  Jules  Guesde, 
claim  that  this  is  actually  the  proportion  in  practice.  Marx  himself  would 
probably  have  been  more  moderate  in  his  estimate,  because  in  one  part  of  his 
thesis  he  accepts  the  statement  of  English  manufacturers  who  declared  that  it 
was  just  the  last  hour  that  gave  them  their  profits. 


454  MARXISM 

means  the  supererogatory  labour  which  yields  nothing  to  the  worker, 
but  merely  involves  an  extra  tax  upon  his  energies  and  simply 
increases  the  capitalist's  fortune. 

Naturally  the  capitalist's  interest  is  to  augment  this  surplus  value 
which  goes  to  swell  his  profits.  This  can  be  effected  in  a  number  of 
ways,  and  an  analysis  of  some  of  these  processes  is  one  of  the  most 
characteristic  features  of  the  Marxian  doctrine.  This  analysis  may 
be  summed  up  under  two  main  divisions. 

1.  The  first  method  is  to  prolong  the  working  day  as  much 
as  possible  in  order  to  increase  the  number  of  hours  of  surplus 
labour.     If  the  number  of  working  hours  can  be  increased  from 
ten  to  twelve  the  surplus  will  automatically  grow  from  five  to  seven. 
This  is  exactly  what  manufacturers  have  always  tried  to  do.    Factory 
legislation,  however,  has  forced  some  of  them  to  limit  the  number 
of  hours,  and  this  has  resulted  in  checking  the  growth  of  surplus 
value  somewhat.     But  this  check  applies  only  to  a  limited  number 
of  industries. 

2.  A  second  method  is  to  diminish  the  number  of  hours  necessary 
to  produce  the  worker's  sustenance.     Were  this  to  fall  from  five  to 
three  it  is  clear  that  the  surplus  would  again  rise  from  five  to  seven. 
Such  reduction   is   possible   through   the   perfection   of  industrial 
organisation  or  through  a  reduction  in  the  cost  of  living,  a  result 
which  is  usually  effected  by  means  of  co-operation.1    The  capitalist 
also  often  manages  to  bring  this  about  by  setting  up  philanthropic 
institutions  or  by  employing  women  and  children,  who  require  less 
for  their  upkeep  than  adults.     Women  and  children  have  been  taken 
from  the  house  and   the  task  of    housekeeping  and  cookery  has 
been  left  in  the  hands  of  the  men.     But  laws  regulating  the  employ- 
ment of  women  and  children  have  again  defeated  these  tactics.2 

1  The  development  of  machinery,  according  to  the  Marxian  theory,  tends 
to  reduce  the  cost  of  living,  and  consequently  the  price  of  labour,  by  producing 
cheaper  clothes,  furniture,  etc.,  and  to  a  lesser  extent  cheaper  food. 

By  parity  of  reasoning  ought  it  not  to  reduce  the  price  of  goods  produced 
by  the  wage-earner  and  so  lower  the  surplus  value  ?  We  must  be  careful, 
however,  not  to  confuse  a  reduction  in  the  price  of  each  unit  with  a  reduction 
in  the  total  value  of  the  articles  produced  by  machinery.  A  yard  of  cloth  pro- 
duced by  a  modern  loom  has  not  the  same  value  as  a  yard  produced  by  an  old 
hand -loom.  But  the  value  of  the  total  quantity  produced  each  day  must  be 
equal  to  the  value  produced  by  hand,  provided  the  same  number  of  hours  have 
been  spent  upon  its  production. 

*  Marx  points  out  that  there  are  other  ways  of  increasing  the  amount  of  work 
done  and  of  adding  to  the  surplus  value,  such  as  the  speeding  up  of  labour. 
Speeding  up  does  not  increase  the  value  of  the  goods,  because  the  value  depends 
upon  the  time  spent  upon  them,  and  not  upon  the  intensity  of  the  effort  put 
forth,  but  it  does  lower  the  cost  of  production. 


SURPLUS  LABOUR  AND  SURPLUS  VALUE  455 
Such  is  a  very  brief  summary  of  Marx's  demonstration.  Its 
real  originality  lies  in  the  fact  that  it  does  not  consist  of  commonplace 
recriminations  concerning  the  exploitation  of  workers  and  the  greed 
of  exploiters,  but  shows  how  the  worker  is  robbed  even  when  he 
gets  all  that  he  is  entitled  to.1  It  cannot  be  said  that  the  capi- 
talist has  robbed  him.  He  has  paid  him  a  fair  price  for  his  labour ; 
that  is,  he  has  given  it  its  full  exchange  value.  The  conditions  of 
the  wage  bargain  have  been  observed  in  every  particular  :  equal 
value  has  been  given  in  exchange  for  equal  value.  Given  the 
capitalistic  regime  and  the  free  competition  of  labour,  the  result 
could  not  be  otherwise.  The  worker,  perhaps,  may  be  surprised 
at  this  unexpected  result,  which  only  secures  him  half  the  value 
of  his  labour,  but  he  can  only  look  on  like  a  bewildered  spectator. 
•  Everything  has  passed  oft  quite  correctly.  The  capitalist,  no  doubt, 
is  a  shrewd  person,  and  knows  that  when  he  buys  labour  power  he 
has  got  hold  of  a  good  thing,  because  it  is  the  only  merchandise  which 
possesses  the  mysterious  capacity  of  producing  more  value  than  it 
itself  contains.2  He  knows  this  beforehand,  and,  as  Marx  says, 
it  is  "  the  source  of  considerable  pleasure  to  him."  "  It  is  a  par- 
ticularly happy  condition  of  things  when  the  buyer  is  also  allowed 
to  sell  it  wherever  and  whenever  he  likes  without  having  to  part 
with  any  of  his  privileges  as  a  vendor."  The  result  is  that  the  worker 
has  no  means  of  defence  either  legal  or  economic,  and  is  as  helpless 
as  a  peasant  who  has  sold  a  cow  in  calf  without  knowing  it. 

Hitherto  we  have  spoken  only  of  labour.  But  the  outstanding 
personage  in  the  book — the  hero  of  the  volume — is  capital,  whose 

1  "  Our  friend  Money-bags  .  .  .  must  buy  his  commodities  at  their  value, 
must  sell  them  at  their  value,  and  yet  at  the  end  of  the  process  must  withdraw 
more  value  from  circulation  than  he  threw  into  it  at  starting.  .  .  .  These  are 
the  conditions  of  the  problem.  Hie  Rhodus  /  hie  adUal"  (Kapital,  p.  145.) 
Cf.  p.  215,  where  something  is  said  about  the  different  phases  through  which 
the  idea  of  exploitation  has  passed. 

Although  Marx  never  says  that  the  worker  is  actually  robbed  by  the  capi- 
talist, but  simply  that  the  capitalist  profits  by  circumstances  which  he  is  power- 
less to  change,  that  has  not  prevented  him  treating  the  capitalist  somewhat 
harshly  and  unjustly  even,  judging  from  his  own  point  of  view.  He  speaks 
of  the  capitalist  as  "  a  vampire  which  thrives  upon  the  blood  of  others  and 
becomes  stouter  and  broader  the  more  blood  it  gets."  He  might  have  added 
that  no  blame  could  be  attached  to  the  vampire,  seeing  that  it  only  obeyed 
the  tendencies  of  its  nature. 

1  "  By  turning  his  money  into  commodities  that  serve  as  the  material  elemente 
of  a  new  product,  and  as  factors  in  the  labour  process  by  incorporating  living 
labour  with  their  dead  substance,  the  capitalist  at  the  same  time  convert*  value 
— i.e.  past,  materialized,  and  dead  labour — into  capital,  into  value  big  with 
value,  a  live  monster  that  is  fruitful  and  multiplies."  (Hid.,  p.  176.) 


456  MARXISM 

name  appears  on  the  title-page.  Our  exposition  of  the  Marxian 
doctrine  of  production  would  accordingly  be  very  incomplete  if  we 
omitted  to  make  reference  to  his  treatment  of  capital. 

Taken  by  itself  capital  is,  of  course,  sterile,  for  it  is  understood 
that  labour  is  the  sole  source  of  value.  But  labour  cannot  produce 
unless  it  consumes  a  certain  proportion  of  capital,  and  it  is  important 
that  we  should  understand  something  of  the  combination  of  capital 
and  labour. 

Marx  distinguishes  between  two  kinds  of  capital.  The  first 
serves  for  the  upkeep  of  the  working-class  population,  either  in 
the  way  of  wages  or  direct  subsistence.  The  older  economists 
referred  to  it  as  the  Wages  Fund,  and  Marx  calls  it "  variable  capital." 
If  this  kind  of  capital  does  not  directly  take  part  in  production,  it  is 
this  fund,  after  all,  when  consumed  by  labour  that  begets  value  and 
the  surplus  which  is  attached  to  it. 

That  other  kind  of  capital  which  directly  assists  the  productive 
activity  of  labour  by  supplying  it  with  machinery,  tools,  etc., 
Marx  calls  "  constant  capital."  This  latter  kind  of  capital,  which 
is  not  absorbed  or  vitalized  by  labour,  does  not  result  in  the 
production  of  surplus  value.  It  simply  produces  the  equivalent  of 
its  value,  which  is  the  sum  total  of  all  the  values  absorbed  during 
the  time  when  it  was  being  produced.  This  constant  capital  is 
evidently  the  crystallized  product  of  labour,  and  its  value,  like  that 
of  any  other  product,  is  determined  solely  by  the  number  of  hours 
of  labour  it  has  taken  to  produce.  This  value,  whether  it  include 
the  cost  of  producing  the  raw  material  or  merely  the  cost  of  labour 
employed  in  elaborating  it,  should  be  rediscoverable  in  the  finished 
product.  But  there  is  nothing  more — no  surplus.  The  economists 
refer  to  this  as  depreciation,  and  everyone  knows  that  depreciation 
implies  no  profits  at  any  rate.1 

It  seems  quite  obvious  that  it  is  to  the  interest  of  the  capitalist 
to  employ  only  variable  capital,  or  at  least  that  it  will  pay  him 
to  reduce  the  amount  of  constant  capital  used  to  the  irreducible 
minimum.2  But  we  are  here  met  with  an  anomaly  which  is  the 

1  A  potter  working  with  his  hands  makes  a  vase  in  ten  hours  ;  each  vase, 
then,  costs  ten  hours'  labour.  The  same  potter  decides  to  make  a  wheel — a 
species  of  fixed  capital.  Setting  up  the  wheel  was  a  hundred  hours'  task.  If  he 
still  continues  to  produce  only  one  vase  per  diem,  which  is  a  perfectly  absurd 
proposition,  for  he  would  never  have  gone  to  the  trouble  of  making  the  wheel 
if  it  did  not  mean  some  advantage  to  him,  the  value  of  each  vase  will  now  be 
10  hours  +  100  hours  divided  by  «,  which  is  the  number  of  vases  he  would  have 
produced  had  he  not  wasted  his  time  making  a  wheel. 

1  Take  two  industries,  A  and  B.  each  employing  a  capital  of  £1000.    In  A  the 


SURPLUS  LABOUR  AND  SURPLUS  VALUE    457 

despair  of  all  Marxian  commentators,  and  which  must  have  caused 
Marx  himself  some  amount  of  embarrassment,  if  we  may  judge 
by  the  laborious  demonstration  which  he  gives.1 

If  fixed  capital  is  really  unproductive,  how  is  it  that  modern 
production  is  always  increasing  the  quantity  of  fixed  capital  which  it 
employs,  until  this  has  now  become  one  of  its  most  familiar  features  ? 
Is  it  because  it  yields  less  profit  than  that  yielded  by  the  smaller 
handicrafts  or  agriculture  ?  Again,  how  are  we  to  account  for  the 
variation  in  the  rates  of  profit  in  different  industries  according  to 
the  different  quantities  of  capital  employed,  seeing  that  it  is  an 
axiom  of  political  economy  that  under  a  regime  of  free  competition 
with  equal  security  for  everybody  the  returns  on  different  capitals 
should  everywhere  be  the  same  ? 

Marx  replies  by  saying  that  the  rate  of  profit  is  the  same  for  all 
capitalists  within  the  country,  but  that  this  rate  is  the  average 
of  the  different  rates  in  all  the  different  industries.  In  other  words, 
it  is  the  rate  that  would  obtain  if  every  industry  in  the  country 
employing  varying  amounts  of  fixed  and  circulating  capital  formed 
a  part  of  one  whole.  It  must  not  be  thought  of  as  a  kind  of  statistical 
average,  but  simply  as  a  kind  of  average  which  competition  brings 
about.  The  result  is  other  than  might  have  been  expected.2  Those 

amount  of  fixed  capital  is  £100  and  circulating  £900.  In  B  the  fixed  —  £900 
and  the  circulating  £100.  Admitting  that  surplus  value  is  at  the  rate  of  100 
per  cent.,  as  in  the  example  chosen  just  now,  the  total  surplus  value  in  A  will 
be  £900,  equal  to  a  profit  of  90  per  cent,  on  a  capital  of  £1000.  B,  on  the  other 
hand,  will  only  make  £100  profit,  which  is  equal  to  10  per  cent. 

1  This  explanation  only  appears  in  the  later  volumes,  which  were  published 
after  his  death. 

It  is  true  that  Marx  had  drawn  attention  to  the  contradiction  in  the  first 
volume,  but  no  explanation  was  forthcoming  until  the  later  volumes  appeared. 
Having  stated  that  the  greater  quantity  of  surplus  value  is  the  direct  result  of 
the  greater  proportion  of  circulating  capital  employed,  he  proceeds :  "  This 
law  clearly  contradicts  all  experience  based  on  appearance.  Everyone  knows 
that  a  cotton -spinner  who,  reckoning  the  percentage  on  the  whole  of  his  applied 
capital,  employs  much  constant  and  little  variable  capital,  does  not,  on  account 
of  this,  pocket  less  profit  or  surplus  value  than  a  baker  who  relatively  sets  in 
motion  much  variable  and  little  constant  capital.  For  the  solution  of  this 
apparent  contradiction  many  intermediate  terms  are  as  yet  wanted,  as  from  the 
standpoint  of  elementary  algebra  many  intermediate  terms  are  wanted  to  demon- 
strate that  $  may  represent  an  actual  magnitude.  .  .  .  Vulgar  economy,  which, 
indeed,  has  really  learnt  nothing,  here,  as  everywhere,  sticks  to  appearance* 
in  opposition  to  the  law  which  regulates  and  explains  them."  (Kapital,p.  274.) 

It  is  probable  that  Marx  was  not  very  well  satisfied  with  his  explanation, 
which  may  account  for  his  reluctance  to  publish  it  during  his  lifetime. 

1  In  the  example  just  given  suppose  A  and  B  represent  the  total  industry  of 
the  country :  the  whole  nati  al  industry  will  be  made  up  of  £900  +  £100 


458  MARXISM 

industries  which  have  a  large  amount  of  variable  capital — agriculture, 
for  example — find  themselves  with  just  the  average  rate  of  return, 
but  draw  much  less  in  the  way  of  surplus  value  than  they  had 
expected,  and  so  Marx  refers  to  them  as  undertakings  of  an  inferior 
character.  On  the  contrary,  those  industries  which  possess  a  large 
amount  of  constant  capital  draw  more  than  their  capital  had 
led  them  to  hope  for,  and  Marx  refers  to  them  as  industries  of  a 
superior  character.1  Hence  those  industries  which  employ  a  con- 
siderable amount  of  machinery  expand  at  the  expense  of  the  others. 
It  is  because  the  latter  kind  find  themselves  in  a  more  favourable 
position,  or,  in  other  words,  realize  greater  profits,  that  they  do 
employ  surplus  labour,  from  which  surplus  value  is  naturally 
derived.2 

While  admiring  the  ingenuity  of  the  dialectics,  we  must  not 
blind  ourselves  to  the  simple  fact  which  Marx  was  so  anxious  to  hide, 
but  which  is  nevertheless  implicit  in  all  this,  namely,  that  the  rate 
of  profit,  which  means  also  the  value  of  the  goods,  is  regulated  by 
competition — that  is,  by  demand  and  supply — but  bears  no  relation 
to  the  quantity  of  labour  employed.  We  must  also  remember  that 
the  entrepreneur,  far  from  seeing  his  profits  diminish  as  he  employs 
less  human  labour,  finds  them  increasing.  This  contradiction  is 

circulating  capital  and  £100  +  £900  fixed— £2000  altogether.  If  the  surplus 
value  be  at  the  rate  of  100  per  cent,  of  the  circulating  capital,  the  total  capital 
value  will  be  £900  +  £100  =-  £1000  on  a  capital  of  £2000,  or  a  percentage  of  50. 

1  Taking  the  example  given  on  p.  427,  the  mean  of  £900  +  £100  —  £500,  and 
industry  A,  instead  of  90  per  cent.,  will  draw  only  50  per  cent,  profit,  while 
industry  B,  instead  of  drawing  only  10  per  cent.,  will  draw  50  per  cent. 

1  We  have  indifferently  employed  the  terms  "  profit  "  and  "  surplus  value  " 
simply  because  the  former  is  a  much  more  familiar  word.  But  we  must  warn 
the  reader  against  thinking  that  the  two  terms  are  synonymous.  The  surplus 
value  is  all  that  part  of  the  value  of  the  produce  which  is  over  and  above  the 
expenses  of  labour  involved  in  its  production — that  enormous  slice  which  becomes 
the  property  of  every  class  in  society  except  the  workers,  not  merely  the  employers, 
but  merchants,  landlords,  etc. ;  while  profit  is  that  part  of  the  surplus  value 
which  the  employers  of  labour  keep  for  their  own  use.  The  rate  of  profit  also 
is  something  quite  different  from  the  percentage  of  surplus  value,  as  we  shall 
see  later. 

We  must  call  attention  once  more  to  the  different  interpretations  which  have 
been  given  of  the  term  "  profit."  Marx  and  the  English  economists  take  the 
word  to  comprise  the  whole  revenue  of  capital  under  a  regime,  of  free  competition, 
no  distinction  being  drawn  between  profit  properly  so  called  and  interest.  To- 
day we  understand  by  profit  the  income  drawn  by  the  entrepreneur — as  distinct 
from  the  capitalist — as  the  result  of  certain  favourable  circumstances,  notably 
imperfect  competition. 

It  would  be  absurd  to  speak  of  a  law  of  equality  of  profit,  seeing  that  profit, 
as  we  have  defined  it,  is,  like  rent,  a  differential  revenue. 


LAW  OF  CONCENTRATION  OR  APPROPRIATION    459 

just  one  of  those  flaws  that  finally  cause  the  downfall  of  the  majestic 
edifice  so  laboriously  raised  by  Marx. 

2.  THE  LAW  OF  CONCENTRATION  OR  APPROPRIATION 

THE  law  of  concentration  of  capital,1  which  can  only  be  interpreted 

in  the  light  of  economic  history,  is  an  attempt  to  show  that  the 

regime  of  private  property  and  personal  gain  under  which  we  live 

is  about  to  give  place  to  an  era  of  social  enterprise  and  collective 

property.8      Let   us    try  to  follow  the    argument    as    given   by 

Marx. 

Again  must  we  cast  back  our  thoughts  to  a  period  before  the 
earliest  beginnings  of  capital  in  the  sixteenth  century — a  period 
when,  according  to  the  socialists,  there  existed  neither  capital  nor 
capitalist.  Capital  in  the  economic  sense  of  a  mere  instrument  of 
production  must  have  existed  even  before  this  time,  but  the  socialists 
are  of  opinion  that  it  had  quite  a  different  significance  then,  and 
it  is  important  that  we  should  appreciate  their  point  of  view.  Their 
employment  of  the  term  is  closely  akin  to  the  vulgar  use  of  the  word 
as  anything  that  yields  a  rent,  and  yields  the  said  rent  as  the  result, 

1  We  are  fully  aware  of  the  fact  that  our  method  of  approach  must  appear 
absurd  from  the  Marxian  standpoint,  because  it  lays  Marx  open  to  the  charge 
of  starting  with  a  preconceived  idea,  much  after  the  style  of  economists  like 
Bastiat,  for  example.  Such  a  method,  it  is  contended,  is  utterly  unscientific 
and  unworthy  of  a  great  mind  like  Marx's. 

However  great  he  may  have  been,  we  cannot  help  thinking  that,  in  common 
with  most  scientists,  he  discovered  just  what  he  was  looking  for,  and  it  would 
be  difficult  to  prove  that  Marx  was  not  a  socialist  long  before  he  began  the 
writing  of  Kapital,  even  long  before  he  had  constructed  a  system  at  all. 

Our  object  in  stating  the  conclusion  first  of  all  is  to  help  the  reader  to  an 
understanding  of  the  argument,  but  it  is  quite  open  to  anyone  who  thinks 
differently  to  say  that  Marx  had  not  the  least  idea  where  the  analysis  would 
lead  him. 

1  The  general  use  of  the  term  "  collectivism  "  is  largely  due  to  Marx.  While 
'*  collectivism  "  occurs  almost  on  every  page  of  the  Manifesto,  the  term  "  com- 
munism," on  the  other  hand,  is  never  once  employed. 

James  Guillaume,  in  the  preface  to  the  second  volume  of  Bakunin's  works, 
p.  xxxvi,  gives  the  following  account  of  the  origin  of  the  word  "  collectivism  " : 
"  At  the  fourth  General  Congress  of  the  International,  held  at  Bale  in  1869,  almost 
every  delegate  voted  in  favour  of  collective  property.  But  there  were  two 
distinct  opinions  cherished  by  the  delegates  present.  The  German-Swiss,  the 
English,  and  the  German  delegates  were  really  State  communists.  The  Spanish, 
Belgian,  French-Swiss,  and  most  of  the  French  delegates  were  federal  or  anarchist 
communists  who  took  the  name  of  collectivists.  Bakunin  belonged  to  the 
second  group,  and  to  this  group  also  belonged  the  Belgian  Paepe  and  the  French 
Varlin."  Bakunin  always  spoke  of  himself  as  a  collectivist  and  not  a  com- 
munist, and  in  this  respect  he  differs  from  Marx.  The  habit  of  thinking  that 
all  anarchists  are  communists  is  largely  due  to  Kropotkin. 


460  MARXISM 

not  of  the  capitalist's  labour,  but  of  the  toil  of  others.  But  undei 
the  guild  system  which  preceded  this  condition  of  things  the  majority 
of  the  workers  possessed  most  of  the  instruments  of  production 
themselves. 

Then  follows  a  description  of  a  series  of  changes  which  we  cannot 
attempt  to  study  in  detail,  but  which  forms  a  singularly  dramatic 
chapter  in  the  writings  of  Marx.  New  means  of  communication 
are  established  and  new  markets  opened  as  the  result  of  important 
mechanical  discoveries  coupled  with  the  consolidation  of  the  great 
modern  States.  The  rise  of  banks  and  of  trading  companies,  together 
with  the  formation  of  public  debts,  all  this  resulted  in  the  concen- 
tration of  capital  in  the  hands  of  a  few  and  the  expropriation  of  the 
small  proprietor. 

But  all  this  was  only  a  beginning.  If  capital  in  this  newer  sense 
of  an  instrument  for  making  profit  out  of  the  labour  of  others  was 
ever  to  come  into  its  own  and  develop,  if  the  surplus  labour  and 
surplus  value  of  which  we  have  given  an  analysis  were  really  to 
contribute  to  the  growth  and  upkeep  of  this  capital,  it  was  necessary 
that  the  capitalist  should  be  able  to  buy  that  unique  merchandise 
which  possesses  such  wonderful  qualities  in  the  open  market.  But 
labour-force  can  never  be  bought  unless  it  has  been  previously 
detached  from  the  instruments  of  production  and  removed  from  its 
surroundings.  Every  connexion  with  property  must  be  severed, 
every  trace  of  feudalism  and  of  the  guild  system  must  be  removed. 
Labour  must  be  free — that  is,  saleable ;  or,  in  other  words,  it  "  must 
be  forced  to  sell  itself  because  the  labourer  has  nothing  else  to  sell." 
For  a  long  time  the  artisan  was  in  the  habit  of  selling  his  goods 
to  the  public  without  the  intervention  of  any  intermediary,  but 
a  day  dawned  when,  no  longer  able  to  sell  his  products,  he  was 
reduced  to  selling  himself.1 

The  creation  of  this  new  kind  of  property  based  upon  the  labour 
of  others  meant  the  extinction  of  that  earlier  form  of  property 
founded  upon  personal  labour  and  the  substitution  for  it  of  the 
modern  proletariat.  This  was  the  task  to  which  the  bourgeoisie 
resolutely  set  itself  for  about  three  centuries,  and  its  proclamation 
of  the  liberty  of  the  labourer  and  the  rights  of  man  is  just  its 
paean  of  victory.  Its  task  was  accomplished.  The  expropriated 

1  "  We  think  we  can  perceive  a  change  in  the  physiognomy  of  our  dramatis 
personas.  He  who  before  was  the  money-owner  now  strides  in  front  as  capi- 
talist ;  the  possessor  of  labour-power  follows  as  his  labourer.  The  one  with  an 
air  of  importance,  smirking,  intent  on  business  ;  the  other  timid  and  holding 
back,  like  one  who  is  bringing  his  own  hide  to  market  and  has  nothing  to  expect 
but — abiding."  (Kapital,  p.  155.) 


LAW  OF  CONCENTRATION  OR  APPROPRIATION    461 

artisan  who  was  already  swelling  the  ranks  of  the  proletariat  seemed 
an  established  fact. 

In  reality  this  end  was  only  partially  accomplished  even  in  the 
more  capitalistic  countries,  but  that  there  is  a  general  movement  in 
that  direction  seems  clear  in  view  of  the  following  considerations. 

(a)  The  most  suggestive  fact  in  this  connexion  is  the  growth  of 
production  on  a  large  scale,  resulting  in  the  employment  of  machinery 
and  in   the  rise  of  new  forms  of  organisation  such  as  trusts  and 
cartels,  new  systems  that  were  unknown  in  Marx's  day,  but  which 
have  helped  to  confirm  his  suspicions.      These  trusts  and  cartels 
are  especially  important  from  a  social  point  of  view  because  they 
not  onty  absorb  the  capital  of  the  small  independent  proprietor,  but 
swallow  the  medium-sized  industry  as  well.     This  wonderful  expan- 
sion of  production  on  a  large  scale  means  a  corresponding  growth  in 
the  numbers  of  the  proletariat,  and  capitalism,  by  increasing  the 
number  of  wage-earners,  helps  to  swell  the  ranks  of  its  own  enemies. 
"  What  the  bourgeoisie  produces,  above  all,  therefore,  are  its  own 
gravediggers."  1 

(b)  Over-production  is  another  fruitful  method.     A  contraction 
of  the  market  results  in  a  superabundance  of  workmen  whose  services 
are  always  available.     They  form  a  kind  of  industrial  reserve  army 
upon  which  the  capitalist  may  draw  at  his  pleasure — at  one  moment 
indiscriminately  taking  on  a  number  of  them,  and  throwing  them 
back  on  to  the  streets  again  as  soon  as  the  demand  shows  signs  of 
slackening.8 

(c)  The  concentration  of  the  rural  population  in  towns  is  another 
contributing  factor.     This  movement  itself  is   the   result   of  the 
disappearance  of  the  small  holder  and  the  substitution  of  pastoral 
for  arable  farming,  the  outcome  of  it  all  being  an  addition  to  the 
ranks  of  the  expropriated  proletariat  of  an  increasing  number  of 
hitherto  independent  proprietors  and  producers. 

Such  is  the  advent  and  growth  of  capitalism.  It  comes  into  the 
world  "  with  bloody  putrescence  oozing  out  of  every  pore."  How 
different  is  the  real  history  of  capital  from  the  idyllic  presentation  to 
which  we  are  treated  by  the  economists  1  They  love  to  picture  it 
as  the  slowly  accumulated  fruit  of  labour  and  abstinence,  and  the 
coexistence  of  the  two  classes,  the  capitalists  and  the  workers, 
is  supposed  to  date  from  an  adventure  that  befell  them  both  a  few 

1  Manifesto,  §  1. 

*  One  of  the  chief  objects  of  the  trusts  is  the  avoidance  of  over-production, 
but  that  does  not  mean  less  unemployment ;  on  the  contrary,  a  part  of  their 
policy  consist*  in  closing  down  certain  establishment*  which  appear  to  be  un- 
necessary. 


462  MARXISM 

days  after  creation,  when  the  good  and  the  wise  decided  to  follow 
the  high  road  of  capitalism  and  the  idle  and  vicious  the  stony  path 
of  toil. 

In  reality  capitalism  is  the  outcome  of  class  struggle — a  struggle 
that  will  some  day  spell  the  ruin  of  the  whole  rSgime,  when  the 
expropriators  will  themselves  be  the  expropriated.  We  are  given 
no  details  as  to  how  this  is  to  be  accomplished,  and  this  abstention 
from  prophecy  distinguishes  Marx  from  the  Utopian  socialists  of  the 
last  two  thousand  years.  His  one  object  was  to  show  how  those 
very  laws  that  led  to  the  establishment  of  the  regime  would  some 
day  encompass  its  ruin.1  The  force  of  circumstance  seemed  to 
make  self-destruction  inevitable.  "  The  capital  regime,"  writes 
one  Marxian  socialist,  "  begets  its  own  negation,  and  the  process 
is  marked  by  that  inevitability  which  is  such  a  feature  of  all  natural 
laws."  2  The  following  facts  are  deduced  as  proofs  that  this  process 
of  self-destruction  is  already  in  course  of  being  accomplished. 

(a)  Industrial  crises,  whether  of  over-production  or  under- 
consumption, have  already  become  a  chronic  evil.  The  fact  that 
to  some  extent  they  are  to  be  regarded  as  the  direct  outcome  of  the 
capitalist  system  of  production  cannot  prevent  their  damaging  that 
system.  The  continual  growth  of  fixed  at  the  expense  of  circu- 
lating capital,  involving  as  it  does  the  substitution  of  machinery  for 
hand  labour,  must  also  involve  a  continual  reduction  of  the  surplus 
value.  In  order  to  counteract  this  tendency  the  capitalists  find 
themselves  forced  to  keep  ahead  with  production ;  they  are  driven 
to  rely  upon  quantity,  as  they  put  it.  The  workers,  on  the  other 
hand,  find  that  it  is  gradually  becoming  impossible  for  them  to  buy 
the  products  of  their  labour  with  the  wages  which  they  get,  because 
they  never  get  a  wage  which  is  equal  to  the  value  of  the  product  of 
their  labour.  Moreover,  they  periodically  find  themselves  out  of 
employment  altogether  and  almost  on  the  verge  of  starvation. 
Proudhon,  as  we  have  already  seen,  laid  considerable  stress  upon 
this,  and  it  is  one  of  the  instances  in  which  Marx  is  obviously 
influenced  by  Proudhon. 

The  idea  which  underlies  the  Marxian  theory  is  that  every  crisis 
involves  a  readjustment  of  the  equilibrium  between  fixed  and  circu- 
lating capital.  The  growth  of  the  former,  though  continuous,  is 
not  always  uniform,  and  whole  sections  of  it  may  occasionally 
be  found  to  be  without  solid  foundation  which  would  warrant  such 
expansion.  But  the  crises  which  result  in  the  destruction  of  these 

1  See  the  Manifesto  for  an  eloquent  statement  of  this. 
1  Labriola. 


LAW  OF  CONCENTRATION  OR  APPROPRIATION    463 

speculative  accretions  give  a  new  spirit  to  the  creation  of  further 
surplus  value,  which  results  in  the  creation  of  further  fixed  capital 
and  more  crises,  and  so  the  process  goes  on.1 

(b)  The  growth  of  pauperism,  which  is  the  direct  outcome  of 
crises  and  want,  is  another  factor.     "The  bourgeoisie  is  unfit  any 
longer  to  be  the  ruling  class  in  society,  and  to  impose  its  conditions 
of  existence  upon  society  as  an  overriding  law.     It  is  unfit  to  rule 
because  it  is  incompetent  to  assure  an  existence  to  its  slave  within 
his  slavery,  because  it  cannot  help  letting  him  sink  into  such  a  state 
that  it  has  to  feed  him  instead  of  being  fed  by  him."  • 

(c)  The  rapid  multiplication  of  joint  stock  companies  is  the 
final  buttress  with  which  the  Marxians  have  strengthened  their 
contention.     Under  the  joint  stock  principle  the  right  of  property 
is  simply  reduced  to  the  possession  of  a  few  strips  of  paper  giving 
the  anonymous  owner  the  right  to  draw  dividends  in  some  commer- 
cial concern  or  other.     Profit  is  seen  in  all  its  nakedness  as  a  dividend 
which  is  wholly  independent  of  all  personal  effort  and  produced 
entirely  as  the  result  of  the  workers'  drudgery.     The  duty  of  per- 
sonally supervising  the  methods  of  production  and  of  opening  up 
new  and  better  ways  of  manufacturing,  which  served  to  disguise 
the  real  character  of  the  individual  employer  and  to  justify  his 
existence,  is  no  longer  performed  by  the  owner,  but  falls  to  the  lot 
of  two  new  functionaries,  the  parasitic  company  director  on  the 
one  hand  and  the  salaried  official  on  the  other. 

Once  the  whole  industry  of  a  country  becomes  organized  on  a 
joint  stock  basis — or,  better  still,  once  it  passes  over  into  the 
hands  of  a  trust,  which  is  simply  a  manifestation  of  the  joint-stock 
principle  at  its  highest — expropriation  will  be  a  comparatively 
simple  matter.  By  a  mere  stroke  of  the  pen  property  hitherto 
held  by  private  shareholders  will  be  transferred  into  the  custody 
of  the  State  with  hardly  a  change  in  the  economic  mechanism  itself. 

Thus  the  expropriation  of  the  bourgeoisie  will  be  a  much  easier 
task  than  was  the  expropriation  of  the  artisan  by  the  bourgeois  a 
few  centuries  ago.  In  the  past  it  was  a  case  of  the  few  subjugating 
the  many,  but  in  the  future  the  many  will  overwhelm  the  few — 
thanks  to  the  law  of  concentration. 

But  what  is  to  be  the  outcome  of  the  Marxian  programme  (we 
cannot  speak  of  its  aim  or  ideals,  for  Marx  scorned  such  terms)  ? 
The  general  opinion  seems  to  be  that  it  involves  the  abolition  of 
private  property,  and  that  the  opinion  is  not  altogether  without 
foundation  may  be  seen  from  a  perusal  of  the  Manifesto,  where  we 
1  Kapital,  p.  647.  '  Manifesto,  f  1. 


464  MARXISM 

read  that  "  the  theory  of  the  Communists  may  be  summed  up  in  the 
single  sentence  :  Abolition  of  private  property."  1 

The  Manifesto  also  explains  in  what  sense  we  are  to  understand 
this.  The  private  property  which  so  much  needs  suppressing  is 
not  the  right  of  the  worker  to  the  produce  of  his  own  toil,  but  the 
right  of  others  to  appropriate  for  themselves  the  produce  of  that 
labour.  This  is  private  property  as  they  understand  it.  They 
think,  however,  it  would  be  better  to  call  it  bourgeois  property,  and 
they  feel  quite  confident  that  it  is  destined  to  disappear  under  a 
collectivistic  rigime.  As  to  a  man's  right  to  the  product  of  his 
own  labour,  that  surely  existed  formerly,  before  the  peasant  and  the 
craftsman  were  overwhelmed  by  capitalism  and  replaced  by  the 
proletariat.  Collectivism,  far  from  destroying  this  kind  of  property, 
will  rather  revive  it,  not  in  the  antiquated  individualistic  form  of 
letting  each  man  retain  his  own,  which  is  obviously  impossible 
under  division  of  labour  arid  production  on  a  large  scale,  but  of 
giving  to  every  man  a  claim  upon  the  equivalent  of  what  he  has 
produced.2 

This  twofold  task  can  only  be  accomplished  by  undoing  all  that 
capitalism  has  done  ;  by  taking  from  the  capitalists  the  instruments 
of  production  which  they  now  possess  and  restoring  them  to  the 
workmen,  not  individually — that  would  be  impossible  under  modern 
conditions — but  collectively.  To  adopt  the  formula  which  figures 
at  the  head  of  the  party's  programme,  this  means  the  socialisation 
of  the  means  of  production — land,  including  surface  and  subsoil, 
factories  and  capital.  The  produce  of  everyone's  labour,  aftei 
allowing  for  certain  expenses  which  must  be  borne  by  the  com- 
munity as  a  whole,  will  be  distributed  according  to  each  one's 
labour.  Surplus  labour  and  surplus  value  will  thus  disappear 
simultaneously. 

1  Engels  in  his  preface  to  the  Manifesto  admits  that  one  of  its  objects  was 
"  to  announce  the  inevitable  and  imminent  downfall  of  bourgeois  property." 

Nowadays,  however,  it  is  more  usual  to  characterise  the  aim  of  collectivism 
as  an  attempt  to  abolish  the  wage-earning  class — abolition  of  property  being 
simply  a  step  towards  that.  This  is  how  Labriola  writes  in  his  Essai  sur  la 
Conception  mat&rialiste  (2nd  ed.,  p.  62) :  "  The  proletariat  must  learn  to  con- 
centrate upon  one  thing,  namely,  the  abolition  of  the  wage-earner." 

It  is  well  to  remember  that  such  is  also  the  aim  of  the  Associationists,  the 
co-operators,  and  the  Radical  Socialists.  They  proceed,  however,  from  the  oppo- 
site point  of  view,  and  would  multiply  property  rather  than  abolish  it,  thinking 
that  the  latter  process  would  merely  universalise  the  wage-earner. 

s  "  Communism  deprives  no  man  of  the  power  to  appropriate  the  products 
of  society.  All  that  it  does  is  to  deprive  him  of  the  power  to  subjugate  the 
labour  of  others  by  means  of  such  appropriation."  (Manifesto,  §  2.) 


THE  MARXIAN  SCHOOL  465 

This  expropriation  of  the  capitalists  will  be  the  final  stage,  for, 
unlike  the  preceding  movements,  it  will  not  be  undertaken  for  the 
benefit  of  a  single  class — not  even  for  the  benefit  of  the  workers. 
It  will  be  for  the  interest  of  everybody  alike,  for  the  benefit  of  the 
nation  as  a  whole.  It  will  also  be  adequate  to  cope  with  the  change 
which  industry  has  recently  undergone ;  in  other  words,  both 
production  and  distribution  will  be  on  a  collective  basis. 


II :  THE  MARXIAN  SCHOOL 

AFTER  this  summary  exposition  of  the  principal  theories  of  Karl 
Marx,  we  must  now  try  to  fix  the  general  character  of  the  school 
that  bears  his  name  l  and  to  distinguish  it  from  the  other  socialist 
schools  that  we  have  already  studied. 

(a)  In  the  first  place,  it  proudly  claims  for  its  teaching  the  title 
of  scientific  socialism,  but  much  care  must  be  exercised  hi  interpret- 
ing the  formula.  No  economist  has  ever  shown  such  contempt  or 
betrayed  such  passion  in  denouncing  Phalanst^res,  Utopias,  and 
communistic  schemes  of  every  kind.  To  think  that  the  Marxians 
should  add  to  the  number  of  such  fantastic  dreams  1  What  they 
claim  to  do,  as  M.  Labriola  points  out  (may  the  shades  of  Fourier 
forgive  their  presumption  !),  is  to  give  a  thoroughly  scientific 
demonstration  of  the  line  of  progress  which  has  actually  been  fol- 
lowed by  civilised  societies.*  Their  one  ambition  is  to  gauge  the 

1  To  say  that  Karl  Marx  was  the  leader  of  a  great  socialist  school  is  hardly 
the  way  to  describe  him,  for  it  is  necessary  that  we  should  remember  that  the 
vast  majority  of  those  who  consider  themselves  socialists  are  more  or  less  his 
disciples.  The  other  socialist  schools,  the  anarchists,  the  Fabians,  the  Collinsiflte, 
and  the  followers  of  Henry  George,  cut  a  very  poor  figure  beside  his. 

The  bulk  of  his  adherents  is  drawn  either  from  Germany  or  Russia,  England 
being  the  country  which  has  done  least  to  swell  the  ranks  of  his  followers.  In 
France  the  pure  doctrine  has  been  vigorously  preached  since  1878  by  MM.  Jules 
Gueede  and  Lafargue — the  latter  of  whom  is  Marx's  son-in-law.  But  a  great 
many  French  socialists,  though  collectivists  in  name,  refuse  their  adhesion  to 
the  Marxian  doctrine  in  all  its  rigidity.  They  have  accepted  three  of  his  main 
principles — the  socialisation  of  the  means  of  production,  class  war,  and  inter- 
nationalism— but  reject  his  theory  of  value  and  his  materialistic  conception  of 
history.  Moreover,  they  show  no  desire  to  break  with  the  French  socialist 
tradition,  which  was  pre-eminently  idealistic.  Benoit  Malon,  the  founder  of  the 
Revue  aocialiste  (1885),  was  one  of  the  earliest  representatives  of  French  collec- 
tivism, and  among  his  successors  may  be  reckoned  M.  George  Renard  and 
Fourniere. 

*  Labriola,  Essai  sur  la  Conception  materialiste  de  VUisloire,  p.  24.  The 
Saint-Simonians  had  already  made  a  similar  claim.  It  is  hardly  fair  to  class 
them  among  the  Utopians,  and  some  Marxians  are  quite  ready  to  admit  their 
claim  to  priority  in  this  matter. 


466  MARXISM 

significance  of  the  unconscious  evolution  through  which  society  has 
progressed  and  to  point  the  goal  towards  which  this  cosmic  process 
seems  to  be  tending. 

The  result  is  that  the  Marxian  school  has  a  conception  of  natural 
laws  which  is  much  nearer  the  Classical  standpoint  than  that  of  its 
predecessors.  Of  this  there  can  be  no  doubt.  The  Marxian  theories 
are  derived  directly  from  the  theories  of  the  leading  economists  of 
the  early  nineteenth  century,  especially  from  Ricardo's.  Marx  is  in 
the  line  of  direct  succession.  Not  only  is  this  true  of  the  labour- 
value  theory  and  of  his  treatment  of  the  conflict  between  profits  and 
wages,  but  it  also  applies  to  his  theory  of  rent  and  to  a  whole  host 
of  Ricardian  doctrines  that  have  been  absorbed  wholesale  into  the 
Marxian  philosophy.  And,  paradoxical  as  it  may  sound,  his  abstract 
dogmatic  method,  his  obscure  style,  which  encourages  disciples 
to  retort  that  the  critics  have  misunderstood  his  meaning  and  to 
give  to  many  a  passage  quite  an  esoteric  significance,  is  of  the  very 
essence  of  Ricardo.1  Marx's  theories  are,  of  course,  supported  by 
a  wealth  of  illuminating  facts,  which  unfortunately  have  been 
unduly  simplified  and  drawn  upon  for  purely  imaginary  conclusions. 
We  have  already  had  occasion  to  remark  that  Ricardo  also  owes 
a  good  deal  more  to  the  observation  of  facts  than  is  generally 
believed,  and  his  practice  of  postulating  imaginary  conditions  is 
of  course  notorious.  The  impenitent  Marxian  who  still  wishes 
to  defend  some  of  the  more  untenable  theories  of  Marx,  such  as 
his  doctrine  of  labour-value,  generally  finds  himself  forced  to  admit 
that  Marx  had  supposed  (the  use  of  suppositions  is  an  unfailing 
proof  of  Ricardian  influence)  the  existence  of  society  wherein  labour 
would  be  always  uniform  in  quality.2 

1  Georges  Sorel,  one  of  Marx's  disciples,  writing  in  no  derogatory  spirit,  we 
may  be  certain,  expresses  himself  as  follows  :    "  Our  experience  of  the  Marxian 
theory  of  value  convinces  us  of  the  importance  which  obscurity  of  style  may 
lend  to  a  doctrine  " — a  remark  that  is  applicable  to  other  writers  besides  Marx. 

2  See  Sorel's  article,  Lea  Polemiques  pour  V Interpretation  du  Marxisme,  in 
the  Revue  internationale  de  Sociologie,  1900,  p.  248.     There  is  no  such  thing  as 
a  theory  of  value — in  the  accepted  sense  of  the  term  in  Marx.     What  we  have 
is  a  theory  of  economic  equilibrium  which  would  only  be  true  of  a  very  rudi- 
mentary kind  of  society.     It  is  assumed,  for  example,  that  all  industries  are 
equally  easy  or  difficult,  that  all  the  workers  are  of  one  type,  that  ten  men 
working  for  one  hour  will  produce  the  same  amount  of  wealth  no  matter  what 
task  they  are  engaged  upon.     It  is  this  equality  that  enables  comparison  to  be 
made  between  one  commodity  and  another,  and  this  constitutes  their  value. 
We  are  simply  treated  to  an  abstraction  which  shows  that  with  the  exercise 
of  a  little  ingenuity  it  is  at  least  possible  to  reconcile  the  theory  of  time-value 
and  the  theory  of  market  price. 


THE  MARXIAN  SCHOOL  467 

Marxism  is  simply  a  branch  grafted  on  the  Classical  trunk. 
Astonished  and  indignant  as  the  latter  may  well  seem  at  the  sight 
of  the  strange  fruit  which  its  teaching  has  borne,  it  cannot  deny 
the  fact  that  it  has  nourished  it  with  its  own  life-blood.  "  Das 
Kapital"  as  Labriola  notes,  "  instead  of  being  the  prologue  to 
the  communal  critique,  is  simply  the  epilogue  of  bourgeois  eco- 
nomics."1 

Not  only  has  Marxism  always  shown  unfailing  respect  for  political 
economy  even  when  attacking  individual  economists,  who  are 
generally  accused  of  inability  to  grasp  the  full  significance  of  their 
own  teaching,  but,  strangely  enough,  it  betrays  an  equal  affection 
for  capitalism.2  It  has  the  greatest  respect  for  the  task  which  it 
has  already  accomplished,  and  feels  infinitely  grateful  for  the  revo- 
lutionary part  (such  are  the  words  used)  which  it  has  played  in 
preparing  the  way  for  collectivism,  which  is  almost  imperceptibly 
usurping  its  place.8 

But  the  Marxians  have  one  serious  quarrel  with  the  older  econo- 
mists. It  seemed  to  them  that  the  earliest  writers  on  political 
economy  never  realized  the  relatively  transient  nature  of  the  social 
organism  which  they  were  studying.  This  was  possibly  because 
they  were  conservative  by  instinct  and  had  the  interest  of  the 
bourgeois  at  heart.  They  always  taught,  and  they  fully  believed  it, 
that  private  property  and  proletarianism  were  permanent  features 
of  the  modern  world,  and  that  social  organisation  was  for  ever 
destined  to  remain  upon  a  middle-class  foundation.  They  were  at 
least  unwilling  to  recognize  that  this  also,  like  the  rest,  was  simply  a 
historical  category,  and,  like  them,  also  was  destined  to  vanish.4 

1  Conception  materialiste,  p.  91.  Sorel  says :  "  Marxism  is  really  much 
more  akin  to  the  Manchester  doctrine  than  to  the  Utopian.  We  must  never 
forget  this."  (La  Decomposition  du  Marxisme,  p.  44.) 

1  "  The  bourgeoisie,  historically,  has  played  a  most  revolutionary  part.  .  .  . 
The  bourgeoisie  cannot  exist  without  constantly  revolutionising  the  instruments 
of  production,  and  thereby  the  relations  of  production,  and  with  them  the 
whole  relations  of  society.  .  .  .  All  fixed,  fast-frozen  relations,  with  their  train 
of  ancient  and  venerable  prejudices  and  opinions,  are  swept  away,  all  new- 
formed  ones  become  antiquated  before  they  can  ossify,  all  that  is  solid  melta 
into  air,  all  that  is  holy  is  profaned."  (Manifesto,  §  1.) 

Besides,  the  Marxians  themselves  have  tried  to  prove  that  capital  is  actively 
undermining  its  own  existence,  which  is  surely  the  ne  plus  ultra  of  the  revolu- 
tionary temperament. 

•  "  The  result  is  that  capital  has  managed  to  solve  problems  which  the  Utopians 
tackled  in  vain.  It  has  also  given  rise  to  conditions  which  permit  of  an  entrance 
into  a  new  form  of  society.  Thus  socialism  will  not  need  to  invent  new  machinery 
or  to  get  people  accustomed  to  them,"  etc.  (Sorel,  foe.  eft.,  p.  41.) 

1  "  The  economists  regard  the  feudal  institutions  as  artificial,  the  bourgeois 


468  MARXISM 

(b)  The  Marxian  school  also  differs  from  every  previous  socialist 
school  in  the  comparative  ease  with  which  it  has  eschewed  every 
consideration  of  justice  and  fraternity,  which  always  played  such 
an  important  role  in  French  socialism.  It  is  interested,  not  in  the 
ideal,  but  in  the  actual,  not  in  what  ought  to  be,  but  in  what  is  likely 
to  be.  "  The  theoretical  conclusions  of  the  communists  are  in  ric 
way  based  on  ideas  or  principles  that  have  been  invented,  or  dis- 
covered by  this  or  that  would-be  universal  reformer.  They  merely 
express,  in  general  terms,  actual  relations  springing  from  an  existing 
class  struggle,  from  a  historical  movement  going  on  under  our  very 
eyes."  1 

To  economic  facts  they  attributed  an  importance  altogether 
transcending  their  influence  in  the  economic  sphere.  Their  belief 
was  that  the  several  links  which  unify  the  many-sided  activities  of 
society,  whether  in  politics,  literature,  art,  morality,  or  religion, 
are  ultimately  referable  to  some  economic  fact  or  other.  None  of 
them  but  is  based  upon  a  purely  economic  consideration.  Most 
important  of  all  are  the  facts  relating  to  production,  especially  to 
the  mechanical  instruments  of  production  and  their  operation.  If 
we  take,  for  example,  the  production  of  bread  and  the  successive 
stages  through  which  the  mechanical  operation  of  grinding  has 
passed  from  the  hand-mill  of  antiquity  to  the  water-mill  of  the  Middle 
Ages  and  the  steam-mill  of  to-day,  we  have  a  clue  to  the  parallel 
development  of  society  from  the  family  to  the  capitalistic  system 
and  from  the  capitalistic  to  the  trust,  with  their  concomitants 
slavery,  serfdom,  and  proletarianism.  This  affords  a  far  better 
explanation  of  the  facts  than  any  bourgeois  cant  about  "  the  growth 
of  freedom  "  or  humbug  of  that  nature.  These  are  the  real  founda- 
tions upon  which  every  theory  has  to  be  reared.  This  material- 
istic conception  of  history,2  implying  as  it  does  a  complete  philosophy 
of  history,  is  no  longer  confined  to  the  purely  economic  domain. 

{is  natural.  The  existing  economic  ties,  in  their  opinion,  are  elemental  laws  that 
must  always  bind  society.  .  .  .  They  have  had  some  history,  that  is  all  we  can 
really  say."  (Marx,  Misert  de  la  Philosophic,  pp.  167-168.) 

1  Manifesto,  §  2. 

*  Whenever  they  change  their  method  of  production  men  also  change  their 
whole  social  outlook.  "  The  hand-mill  gave  us  the  servile  State  ;  the  steam- 
mill  is  the  parent  of  the  industrial,  capitalist  State."  (Misere  de  la  Philosophic, 
2nd  ed.,  p.  156.)  This  oft-repeated  phrase  contains  a  picturesque  antithesis 
rather  than  a  scientific  formula  of  historical  materialism.  In  his  preface  to  his 
Kritik  der  politischen  Oekonomie  Marx  expresses  himself  with  much  more  modera- 
tion. The  following  is  the  most  important  passage  of  that  celebrated  page 
(p.  6): 

"  In  the  course  of  their  efforts  at  production  men  enter  into  certain  definite 


THE  MARXIAN  SCHOOL  469 

Taken  in  the  vulgar  sense,  it  seems  to  involve  the  exclusion  of 
every  moral  and  every  humanitarian  consideration.  As  Schaffle 
put  it  in  that  oft-quoted  phrase  of  his,  it  means  reducing  the  social 
question  to  a  "  mere  question  of  the  belly."  The  French  socialists 
find  the  doctrine  somewhat  difficult  to  swallow,  and  they  hardly 
display  the  same  reverence  for  Marx  as  is  shown  in  some  other 
countries.1 

The  orthodox  Marxians  immediately  proceed  to  point  out  that 
such  criticism  is  useless  and  shows  a  complete  misunderstanding  of 
Marx's  position.  Materialism  in  the  Marxian  sense  (and  all  his 
terms  have  a  Marxian  as  well  as  the  ordinary  significance)  does  not 
exclude  idealism,  but  it  does  exclude  ideology,  which  is  a  different 
thing.  No  Marxian  has  ever  advocated  leaving  mankind  at  the 
mercy  of  its  economic  environment ;  on  the  contrary,  the  Marxian 

and  necessary  relations  which  may  be  wholly  independent  of  their  own  individual 
preferences — such  industrial  ties  being,  of  course,  correlative  to  the  state  of  their 
productive  forces.  Taken  together,  all  these  links  constitute  the  economic  struc- 
ture of  society.  In  other  words,  it  supplies  a  basis  upon  which  the  legal  and 
political  superstructure  is  raised,  and  corresponding  to  it  are  certain  social  forms 
which  depend  upon  the  public  conscience.  The  method  of  producing  commo- 
dities, speaking  generally,  fixes  the  social,  political,  and  intellectual  processua 
of  life.  A  man's  conscience  has  less  to  do  with  determining  his  manner  of  life 
than  has  his  manner  of  life  with  determining  the  state  of  his  conscience." 

The  word  "  fixes,"  even  when  qualified  by  "  speaking  generally,"  seem* 
a  little  pronounced,  and  Marxism  has  substituted  the  term  "  explained," 
which  is  somewhat  nearer  the  mark.  Labriola  says  that  "  it  merely  represents 
an  attempt  to  explain  historical  facts  in  the  light  of  the  economic  substructure." 
(Conception  materialiste,  p.  120.) 

This  materialistic  conception  is  developed  in  a  very  paradoxical  fashion  in 
Loria's  La  Constitution  sociale.  He  shows  how  all  history  and  every  war, 
whether  of  Guelph  or  of  Ghibelline,  the  Reformation  and  the  French  Revolution, 
and  even  the  death  of  Christ  upon  Calvary,  rest  upon  an  economic  basis.  In 
Loria's  opinion,  however,  this  basal  fact  is  not  industrialism,  but  the  various 
types  of  land  systems.  See  the  chapter  on  Rent. 

It  would  not  be  correct  to  regard  Marxism  as  a  mere  expression  of  fatalism 
or  out-and-out  determinism.  The  Marxian  pretends  to  be,  and  as  a  matter  of 
fact  he  really  is,  a  great  believer  in  will-power.  Once  the  workers  see  where  their 
interests  really  lie  he  would  have  them  move  towards  that  goal  with  irresistible 
strength.  It  is  not  always  even  necessary  to  define  the  end  quite  clearly  before 
beginning  to  move.  "  Everything  that  has  happened  in  history  has,  of  course, 
been  the  work  of  man,  but  only  very  rarely  has  it  been  the  result  of  deliberate 
choice  and  woll-considered  planning  on  his  part."  (Labriola,  Conception 
matirialiste,  p.  133.)  Elsewhere:  "The  successive  creation  of  different  social 
environments  means  the  development  of  man  himself."  (Ibid.,  pp.  131-132.) 

It  would  be  beyond  the  scope  of  this  work  to  enter  into  a  metaphysical 
discussion  of  these  theories,  however  much  one  would  like  to. 

»  See  the  works  of  MM.  Jaures,  Etude*  tocialistes  ;  George  Renard,  Le  Rtyimt 
;  Fourniere,  L'Individu,  F  Association,  et  I'Stat. 


470  MARXISM 

i 

builds  his  faith  upon  evolution,  which  implies  man's  conscious,  but 
not  very  successful,  effort  to  improve  his  economic  surroundings.1 
The  materialistic  conception  of  history  apparently  is  simply  an 
attempt  at  a  philosophy  of  human  effort.2  Criticism  of  such  elusive 
doctrines  is  not  a  very  easy  task. 

(c)  The  socialism  of  Karl  Marx  is  exclusively  a  working-class 
gospel.  This  is  its  distinctive  trait  and  the  source  of  the  power  it 
wields.  To  some  extent  it  also  explains  its  persistence.  Other 
socialist  systems  have  been  discredited  and  are  gone,  but  the  Marxian 
gospel — no  longer,  of  course,  the  sublime  masterpiece  it  was  when 
its  author  first  expounded  it — has  lost  none  of  its  ancient  vigour, 
despite  the  many  transformations  which  it  has  undergone. 

The  socialists  of  the  first  half  of  the  nineteenth  century  embraced 
all  men  without  distinction,  worker  and  bourgeois  alike,  within 
their  broad  humanitarian  schemes.  Owen,  Fourier,  and  Saint-Simon 
reckoned  upon  the  co-operation  of  the  wealthy  governing  classes  to 
found  the  society  of  the  future.  Marxism  implies  a  totally  different 
standpoint.  There  is  to  be  no  attempt  at  an  understanding  with 
the  bourgeoisie,  there  must  be  no  dallying  with  the  unclean  thing, 
and  the  prohibition  is  to  apply  not  only  to  the  capitalists,  but  also 
to  the  intellectuals  3  and  to  the  whole  hierarchical  superstructure 
that  usually  goes  by  the  name  of  officialdom.  Real  socialism  aims 
at  nothing  but  the  welfare  of  the  working  classes,  which  will  only 
become  possible  when  they  attain  to  power. 

It  may,  of  course,  be  pointed  out  that  socialism  has  always 
involved  some  such  struggle  between  rich  and  poor,  but  it  is  equally 

1  Labriola,  op.  cit.  Vandervelde  (L'Idealisme  Marxists,  in  La  Revue  socialiste, 
February  1904)  says  that  "  upon  final  analysis  it  will  be  found  that  Marx's  whole 
argument  rests  upon  a  moral  basis,  which  is  that  justice  requires  that  every  man 
should  get  all  that  he  produces." 

M.  Landry,  in  a  book  of  lectures  delivered  by  different  authors  entitled 
Etudes  sur  la  Philosophic  morale  au  XI  Xe  Siecle  (p.  164),  is  of  an  entirely  different 
opinion.  He  thinks  that  Marx's  moral  basis  is  simply  potentiality.  La  othei 
words,  everything  that  has  been  created  in  the  ordinary  course  of  economic 
development  is  moral,  everything  that  has  been  destroyed  is  immoral. 

1  Hence  the  alliance  of  the  Marxians  with  what  appears  to  be  a  directly 
opposite  philosophy — that  of  William  James  and  Bergson  (see  Guy  Grand,  La 
Philosophic  syndicaliste). 

'  Manifesto.  It  is  impossible  to  do  away  with  the  intellectuals  altogether, 
but  they  may  be  reduced  to  the  rank  of  mere  wage-earners.  "  The  Marxians 
always  regarded  revolution  as  the  special  privilege  of  the  producers,  by 
whom,  of  course,  they  understood  the  manual  workers,  who,  accustomed  as 
they  are  to  nothing  but  the  factory  regime,  would  force  the  intellectuals  also  to 
supply  some  of  the  more  ordinary  wants  of  life."  (Sorel,  Decomposition  dv 
Marxisme,  p.  51.) 


THE  MARXIAN  SCHOOL  471 

correct  to  say  that  the  battle  has  hitherto  been  waged  over  the 
question  of  just  distribution.  Beyond  that  there  was  no  issue. 
But  in  the  Marxian  doctrine  the  antagonism  is  dignified  with  the 
name  of  a  new  scientific  law,  the  "class  war" — the  worker  against^ 
the  capitalist,  the  poor  versus  the  rich.  The  individuals  are  the 
same,  but  the  casus  belli  is  quite  different.  "  Class  war "  is  a 
phrase  that  has  contributed  not  a  little  to  the  success  of  Marxism, 
and  those  who  understand  not  a  single  word  of  the  theory — and 
this  applies  to  the  vast  majority  of  working  men — will  never  forget 
the  formula.  It  will  always  serve  to  keep  the  powder  dry,  at  any 
rate. 

"  Class  war  "  was  not  a  new  fact.  "  The  history  of  all  hitherto 
existing  society  is  the  history  of  class  struggles."  *  But  although 
it  has  always  existed,  it  cannot  continue  for  ever.  And  the  great 
struggle  that  is  now  drawing  nigh  and  which  gives  us  such  a  tragic 
interest  in  the  whole  campaign  will  be  the  last.  The  collectivist 
regime  will  destroy  the  conditions  that  breed  antagonism,  and  so 
will  get  rid  of  the  classes  themselves.  Let  us  note  in  passing 
that  this  prophecy  is  not  without  a  strong  tinge  of  that  Utopian 
optimism  which  the  Marxians  considered  such  a  weakness  in  the 
earlier  French  socialism. 

(d)  A  final  distinction  of  Marxism  is  its  purely  revolutionary  or  <-- 
catastrophic  character,  which  is  again  unmistakably  indicated  by  its 
adoption  of  "  class  war  "  as  its  watchword.  But  we  have  only  to 
remind  ourselves  that  the  adjective  "  revolutionary  "  is  applied  by 
the  Marxians  to  ordinary  middle-class  action  to  realize  that  the  term 
is  employed  in  a  somewhat  unusual  fashion. 

The  revolution  will  result  in  the  subjection  of  the  wealthier 
classes  by  the  working  men,  but  all  this  will  be  accomplished,  not 
by  having  recourse  to  the  guillotine  or  by  resorting  to  street  rioting, 
but  in  a  perfectly  peaceful  fashion.  The  means  may  be  political 
and  the  method  even  within  the  four  corners  of  the  law,  for  the 
working  classes  may  easily  acquire  a  majority  in  Parliament,  seeing 
that  they  already  form  the  majority  of  the  electors,  especially 
in  those  countries  that  have  adopted  universal  suffrage.  The 

1  Manifesto,  §  2.  It  is  necessary  that  we  should  be  reminded  of  the 
fact  that  the  Saint-Simonians  had  already  emphasised  the  antagonism  by 
speaking,  not  of  rich  and  poor,  but  of  idlers  and  workers.  The  differentiation, 
that  is  to  say,  was  economic.  The  Marxian  distinction  is  quite  different,  for 
the  Saint-Simonians  included  within  the  category  workers,  bankers,  and 
employers,  for  example,  who  are  excluded  by  the  Marxians.  In  some  cases 
the  Saint-Simonians  thought  they  had  even  better  claims  to  inclusion  than  th« 
ordinary  worker. 


472  MARXISM 

method  may  be  simply  that  of  economic   associations  of  working 
men  taking  all  economic  services  into  their  own  hands.1 

The  final  catastrophe  may  come  in  yet  another  guise,  and  most 
Marxians  seem  to  centre  their  hopes  upon  this  last  possibility.  This 
would  take  the  form  of  an  economic  crisis  resulting  in  the  complete 
overthrow  of  the  whole  capitalist  regime — a  kind  of  economic  felo 
de  se.  We  have  already  noted  the  important  place  which  crises 
hold  in  the  Marxian  doctrines. 

But  if  Marxism  does  not  necessarily  involve  resort  to  violence, 
violent  methods  are  not  excluded.  Indeed,  it  considers  that  some 
measure  of  struggle  is  inevitable  before  the  old  social  forms  can 
be  delivered  of  the  new — before  the  butterfly  can  issue  from  the 
chrysalis.  "  Force  is  the  birth-pangs  of  society."  2 

This  is  not  the  place  for  false  sentimentalism.  Evil  and  suffering 
seem  to  be  the  indispensable  agents  of  evolution.  Had  anyone  been 
able  to  suppress  slavery  or  serfdom  or  to  prevent  the  expropriation 
of  the  worker  by  the  capitalist,  it  would  have  merely  meant  drying 
up  the  springs  of  progress  and  more  evil  than  good  would  probably 
have  resulted.3  Every  step  forward  involves  certain  unpleasant 
conditions,  which  must  be  faced  if  the  higher  forms  of  existence 
are  ever  to  become  a  reality.  And  for  this  reason  the  reform 
of  the  bourgeois  philanthropist  and  the  preaching  of  social  peace 
would  be  found  to  be  harmful  if  they  ever  proved  at  all  successful. 
There  is  no  progress  where  there  is  no  struggle.  This  disdainful 
indifference  to  the  unavoidable  suffering  involved  in  transition  is 
inherited  from  the  Classical  economists,  and  provides  one  more  point 
of  resemblance  between  the  two  doctrines.  Almost  identical  terms 
were  employed  by  the  Classical  economists  when  speaking  of  com- 
petition, of  machinery,  or  of  the  absorption  of  the  small  industry 
by  a  greater  one.  In  the  opinion  of  the  Marxians  no  attempt  at 
improving  matters  is  worthy  the  name  of  reform  unless  it  also 

1  The  first  of  these  means,  namely,  the  acquiring  of  public  works  by  the 
State,  is  spoken  of  as  unified  socialism  in  Prance,  whereas  the  second,  which  relies 
upon  direct  action  without  the  assistance  of  any  political  organisation,  is  known 
as  syndicalism  and  is  represented  by  the  Confederation  g6nerale  du  Travail 
(see  p.  480). 

*  Marx,  Misire  de  la  Philosophie.  "  What  does  the  word  '  revolt '  imply  T 
Simply  disobedience  to  law.  But  what  are  these  laws  that  govern  our  lives  T 
They  are  just  the  products  of  bourgeois  society  and  of  the  institutions  which 
they  are  supposed  to  defend.  Revolution  will  simply  mean  replacing  these 
laws  by  others  which  will  have  an  entirely  different  kind  of  justification." 

1  "  It  is  the  worst  side  of  things  that  begets  movement  and  makes  history 
by  begetting  strife.''  (Ibid.,  2nd  ed.,  p.  173.) 


THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS    473 

speeds  the  coming  revolution.     "  But  it  can  shorten  and  lessen  the 
birth-pangs."  * 


III :  THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS 

To  speak  of  Neo-Marxism,  which  is  of  quite  recent  growth,  is  to 
anticipate  the  chronological  order  somewhat,  but  some  such  proce- 
dure seems  imperative  in  the  interests  of  logical  sequence.  It  has 
the  further  merit  of  dispensing  with  any  attempt  at  criticism,  a 
task  which  the  Neo-Marxians  a  have  exclusively  taken  upon  their 
own  shoulders. 

The  two  phases  of  the  crisis  must  needs  be  kept  distinct.  The 
one,  which  is  predominantly  critical — or  reformative,  if  that  phrase 
be  preferred — is  best  represented  by  M.  Bernstein  and  his  school. 
The  other,  which  is  more  or  less  of  an  attempt  to  revive  Marxism, 
has  become  current  under  the  name  of  Syndicalism. 

1.  THE  NEO-MARXIAN  REFORMISTS 

If  we  take  Marx's  economic  theories  one  by  one  as  we  have  done, 
we  shall  find  that  there  is  nothing  very  striking  in  any  of  them, 
and  that  even  the  most  important  of  them  will  not  stand  critical 
scrutiny.  We  might  even  go  farther  and  say  that  this  work  of 
demolition  is  partly  due  to  the  posthumous  labours  of  Marx  himself. 
It  was  the  publication  of  his  later  volumes  that  served  to  call  atten- 
tion to  the  serious  contradiction  between  the  later  and  the  earlier 
sections  of  his  work.  Marxism  itself,  it  seems,  fell  a  prey  to  that 
law  of  self-destruction  which  threatened  the  overthrow  of  the  whole 
capitalistic  regime.  Some  of  Marx's  disciples  have,  of  course,  tried 
to  justify  him  by  claiming  that  the  work  is  not  self-contradictory, 
but  that  the  mere  enumeration  of  the  many  conflicting  aspects  of 
capitalistic  production  strikes  the  mind  as  being  contradictory.8  If 
this  be  so,  then  Kapital  is  just  a  new  edition  of  Proudhon's  Con- 
tradictions tconomiques,  which  Marx  had  treated  with  such  biting 
ridicule.  And  if  the  capitalist  rlgime  is  really  so  full  of  contradic- 
tions that  are  inherent  in  its  very  nature,  how  difficult  it  must  be 

1  Preface  to  Kapital,  p.  xix. 

*  For  the  evolution  of  Marxism  see  Sombart's  lively  volume  Sozialismus 
und  sozialt.  Bewegung  im  19  Jahrhundert  (6th  ed.,  1908),  and  also  Georges  Sorel, 
La  Decomposition  du  Marxisme  (1908). 

*  Labriola,  Socialisme  et  Philosophic,  p.  29.     Others  declare  more  unmis- 
takably still  that  "these  obscure  formula  [the  writer  is  thinking  of  surplui 
labour]  lead  to  equivocation  and  must  be  banished  from  the  science  altogether." 
(Sorel,  Revue  internationale  de  Sociologie,  1900,  p.  270.) 

K.D.  « 


474  MARXISM 

to  tell  whether  it  will  eventuate  in  collectivism  or  not  and  how 
very  rash  is  scientific  prophecy  about  annihilation  and  a  final 
catastrophe  ! 1 

The  fundamental  theory  of  Marxism,  that  of  labour- value,  appears 
to  be  abandoned  by  the  majority  of  modern  Marxians,  who  are 
gradually  veering  round  and  adopting  either  the  "  final  utility  "  or 
the  "  economic  equilibrium  "  theory.2  Even  Marx  himself,  despite 
his  formal  acceptance  of  the  labour-value  theory,  is  constantly 
obliged  to  admit — not  explicitly,  of  course — that  value  depends 
upon  demand  and  supply.3  Especially  is  this  the  case  with  profits, 
as  we  have  already  had  occasion  to  remark.  What  appears  as  an 
indisputable  axiom  in  the  first  volume  is  treated  as  a  mere  working 
hypothesis  in  the  later  ones. 

But  seeing  that  the  other  Marxian  doctrines — the  theories  of 
surplus  value  and  surplus  labour,  for  example — are  mere  deductions 
from  the  principle  of  labour-value,  it  follows  that  the  overthrow  of 
the  first  principle  must  involve  the  ruin  of  the  other  two.  If  labour 
does  not  necessarily  create  value,  or  if  value  can  be  created  without 
labour,  then  there  is  no  proof  that  labour  always  begets  a  surplus  value 
and  that  the  capitalist's  profit  must  largely  consist  of  unremunerated 

1  M.  Sorel  says  of  the  revolutionary  movement  that  everything  connected 
with  it  is  very  improbable.  (Decomposition  du  Marxisme.) 

1  The  Italian  syndicalist  Arthur  Labriola  (Revue  socialiste,  1899,  vol.  i, 
p.  674)  writes  as  follows :  "  While  we  Marxians  are  trying  to  repatch  the 
master's  cloak  political  economy  is  making  some  headway  every  day.  If  we 
compare  Marx's  Kapital  with  Marshall's  Principles— chapter  by  chapter,  that  is 
to  say — we  shall  find  that  problems  which  required  a  few  hundred  pages  in  the 
Kapital  are  solved  in  a  few  lines  by  Marshall."  B.  Croce  (Materialism*)  storico 
ed  Economia  marxistica,  1900,  p.  105)  writes  thus :  "I  am  strongly  in  favour 
of  economic  construction  along  Hedonistic  lines.  But  that  does  not  satisfy  the 
natural  desire  for  a  sociological  treatment  of  profits,  and  such  treatment  is 
impossible  unless  we  make  use  of  the  comparative  considerations  suggested 
by  Marx."  Lastly,  Sorel,  in  Saggi  di  Critica  del  Marxismo  (1903,  p.  13) 
says :  "  It  is  necessary  to  give  up  the  attempt  to  transform  socialism  into  a 
science." 

1  Especially  in  that  passage  to  which  Bernstein  calls  attention  :  "  According 
to  the  law  of  value  not  merely  must  one  devote  the  socially  necessary  amount 
of  time  to  the  production  of  each  commodity,  but  each  group  of  commodities 
must  have  such  extra  effort  spent  upon  it  as  the  nature  of  the  commodity  or 
the  character  of  the  demand  requires.  The  first  condition  of  value  is  utility  or 
the  satisfaction  of  some  social  need — that  is,  value  in  use  raised  to  euch  a  degree 
of  potentiality  as  shall  determine  the  proportion  of  total  social  labour  to  each 
of  the  various  kinds  of  production."  (Kapital,  vol.  iii.) 

Bernstein  adds :  "  This  admission  makes  it  impossible  to  treat  the  themes 
of  Gossen,  of  Jevons,  and  of  Bohm-Bawerk  as  so  many  insig  uficant  irrelevancies. 
(Die  Voraussetzungen  dee  Sozialismtu.) 


THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS    475 

labour.  The  Neo-Marxians  in  reply  point  to  the  fact  that  surplus 
labour  and  surplus  value  do  exist,  else  how  could  some  individuals 
live  without  working?  They  must  obviously  be  dependent  upon 
the  labour  of  others.1  All  this  is  very  true,  but  the  fact  had  been 
announced  by  Sismondi  long  before,  and  the  evil  had  been  denounced 
both  by  him  and  the  English  critics.  It  is  the  old  problem  of 
unearned  increment  which  formed  the  basis  of  Saint-Simon's 
doctrine  and  Rodbertus's  theory,  and  which  has  been  taken  up  quite 
recently  by  the  English  Fabians. 

It  is  difficult  to  see  what  definite  contribution  Marx  has  made  to 
the  question,  and  the  old  problem  as  to  whether  workers  are  really 
exploited  or  not  and  whether  the  revenues  obtained  by  the  so-called 
idle  classes  correspond  to  any  real  additional  value  contributed  by 
themselves  still  remains  unsettled.  We  can  only  say  that  his 
historical  exposition  contains  several  very  striking  instances  which 
seem  to  prove  this  exploitation,  and  that  this  is  really  the  most 
solid  part  of  his  work. 

Passing  on  to  the  law  of  concentration — the  vertebral  column 
of  the  Marxian  doctrine — we  shall  find  upon  examination  that  it  is 
in  an  equally  piteous  condition.  The  most  unsparing  critic  in 
this  case  has  been  a  socialist  of  the  name  of  Bernstein,  who  has 
adduced  a  great  number  of  facts  a — many  of  them  already  advanced 
by  the  older  economists — which  go  to  disprove  the  Marxian  theory. 
It  may  be  impossible  to  deny  that  the  number  of  great  industries  is 
increasing  rapidly  and  that  their  power  is  growing  even  more  rapidly 
than  their  numbers,  but  it  certainly  does  not  seem  as  if  the  small 
proprietors  and  manufacturers  were  being  ousted.  Statistics,  on 
the  contrary,  show  that  the  number  of  small  independent  manu- 
facturers (the  artisans  who,  according  to  Marxian  theory,  had  begun 
to  disappear  as  far  back  as  the  fourteenth  century)  is  actually 
increasing.  Some  new  invention,  such  as  photography,  cycling, 
or  the  application  of  electricity  to  domestic  work,  or  the  revival  of 
an  industry  such  as  horticulture,  gives  rise  to  a  crowd  of  small 
industries  and  new  manufactures. 

But  concentration  as  yet  has  scarcely  made  an  appearance 
even  in  agriculture,  and  all  the  efforts  of  the  Marxians  to  make 

1  "  The  surplus-value  theory  may  be  true  or  it  may  be  false,  but  that  will 
make  no  difference  to  the  existence  of  surplus  labour.  Surplus  labour  is  a  fact 
of  experience,  demonstrable  by  observation,  and  requires  no  deductive  proof." 
(Bernstein,  foe.  tit.,  p.  42. )  That  Marx  did  not  treat  it  with  quite  the  same  indif- 
ference is  evident  from  the  fact  that  the  whole  theory  ia  developed,  not  inci- 
dentally  in  the  course  of  the  work,  but  at  the  very  opening  of  the  book. 

1  In  the  book  already  quoted,  which  was  published  in  1899. 


476  MARXISM 

this  industry  fit  in  with  their  theory  have  proved  utterly  useless. 
America  as  well  as  Europe  has  been  laid  under  tribute  with  a  view 
to  supplying  figures  that  would  prove  their  contention.  The 
statistics,  however,  are  so  confusing  that  directly  opposite  conclu- 
sions may  be  drawn  from  the  same  set  of  figures.  The  amount  of 
support  which  they  lend  to  the  Marxian  contention  seems  very 
slight  indeed.  On  the  whole  they  may  be  said  to  lend  colour  to 
the  opposite  view  that  the  number  of  businesses  is  at  least  keeping 
pace  with  the  growth  of  population.  Were  this  to  be  definitely 
verified  it  would  set  a  twofold  check  upon  the  Marxian  theory.  Not 
only  would  it  be  proved  that  petite  culture  is  on  the  increase,  but  it 
would  also  be  found  that  it  is  on  the  increase  simply  because  it  is 
more  productive  than  "  the  great  industry." 

But  suppose  for  the  sake  of  hypothesis  that  we  accept  the  law 
of  concentration  as  proved.  That  in  itself  is  not  enough  to  justify 
the  Marxian  doctrine.  To  do  this  statistics  proving  an  increasing 
concentration  of  property  in  the  hands  of  fewer  individuals  are  also 
necessary ;  but  in  this  case  the  testimony  of  the  figures  is  all  in  the 
opposite  direction.  We  must  not  be  deceived  by  the  appearance 
of  that  new  species,  the  American  millionaire.  There  are  men  who 
are  richer  than  the  richest  who  ever  lived  before,  but  there  are  also 
more  men  who  are  fairly  rich  than  ever  was  the  case  before.  The 
number  of  men  who  make  a  fortune — not  a  very  great  one,  perhaps, 
but  a  moderate-sized  or  even  a  small  one — is  constantly  growing. 
Joint  stock  companies,  which  according  to  the  Marxian  view  afforded 
striking  evidence  of  the  correctness  of  his  thesis,  have,  on  the  con- 
trary, resulted  in  the  distribution  of  property  between  a  greater 
number  of  people,  which  proves  that  the  concentration  of  industry 
and  the  centralisation  of  property  are  two  different  things.  Or 
take  the  wonderful  development  of  the  co-operative  movement  and 
reflect  upon  the  number  of  proletarians  who  have  been  transformed 
into  small  capitalists  entirely  through  its  instrumentality.  To 
think  that  expropriation  in  the  future  will  be  easier  because  the 
number  of  expropriated  will  be  few  seems  quite  contrary  to  facts. 
It  looks  as  if  it  were  the  masses,  whose  numbers  are  daily  increasing, 
who  will  have  to  be  expropriated,  after  all.  More  than  half  the 
French  people  at  the  present  day  possess  property  of  one  kind  or 
another — movable  property,  land,  or  houses.  And  yet  the  collec- 
tivists  never  speak  except  with  the  greatest  contempt  of  these 
rag-ends  and  tatters  of  property,  fondly  imagining  that  when  the 
day  of  expropriation  comes  the  expropriated  will  joyfully  throw 
their  rags  aside  in  return  for  the  blessings  of  social  co- proprietorship. 


THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS    477 

Apparently,  however,  the  Marxians  themselves  no  longer  believe  all 
this.  Their  language  has  changed  completely,  and  just  now  they 
are  very  anxious  to  keep  these  rags  and  tatters  in  the  hands  of  their 
rightful  owners. 

The  changes  introduced  into  the  programme  as  a  result  of  this 
have  transformed  its  character  almost  completely.  When  it  was 
first  drawn  up  and  issued  as  a  part  of  the  Communist  Manifesto 
nearly  fifty  years  ago  everybody  expected  that  the  final  disappearance 
of  the  small  proprietor  was  a  matter  of  only  a  few  years,  and  that 
at  the  end  of  that  time  property  of  every  description  would  be 
concentrated  in  the  hands  of  a  powerful  few.  This  continuous 
expropriation  would,  of  course,  swell  the  ranks  of  the  proletariat, 
so  that  compared  with  their  numbers  the  proprietors  would  be  a 
mere  handful.  This  would  make  the  final  expropriation  all  the  easier. 
With  such  disparity  in  numbers  the  issue  was  a  foregone  conclusion, 
no  matter  what  method  was  employed,  were  it  a  revolution  or  merely 
a  parliamentary  vote. 

Unfortunately  for  the  execution  of  this  programme,  not  only  do 
we  find  the  great  capitalist  still  waxing  strong,  which  is  quite  in 
accordance  with  the  orthodox  Marxian  view,  but  there  is  no  evidence 
that  the  small  proprietor  or  manufacturer  is  on  the  wane.  The 
Marxian  can  scarcely  console  himself  with  the  thought  that  the 
revolution  is  gradually  being  accomplished  without  opposition  when 
he  sees  hundreds  of  peasant  proprietors,  master  craftsmen,  and 
small  shopkeepers  on  every  side  of  him.  Nor  is  there  much  chance 
of  forcing  this  growing  mass  of  people,  which  possibly  includes  the 
majority  of  the  community  even  now,  to  change  its  views.  We  can 
hardly  expect  them  to  be  very  enthusiastic  about  a  programme  that  ' 
involves  their  own  extinction. 

A  distinction  has  obviously  been  drawn  between  two  classes  of 
proprietors.  The  socialisation  of  the  means  of  production  is  only  to 
apply  to  the  case  of  wealthy  landowners  and  manufacturers  on  a 
large  scale — to  those  who  employ  salaried  persons.  But  the  property 
of  the  man  who  is  supporting  himself  with  the  labour  of  his  own 
hands  will  always  be  respected.  The  Marxians  defend  themselves 
from  the  reproach  of  self-contradiction  and  opportunism  by  stating 
that  their  action  is  strictly  in  accordance  with  the  process  of  evolu- 
tion. You  begin  by  expropriating  those  industries  that  have  arrived 
at  the  capitalistic  and  wage-earning  stage.  The  criterion  must  be 
the  presence  or  otherwise  of  a  surplus  value. 

The  conclusion  is  logical  enough,  but  one  would  like  to  know 
what  is  going  to  become  of  the  small  independent  proprietor.  Will 


478  MARXISM 

he  be  allowed  to  grow  and  develop  alongside  of  the  one  great  pro- 
prietor— the  State  ?  We  can  hardly  imagine  the  two  systems 
coexisting  and  hopelessly  intermingled,  as  they  would  have  to  be, 
but  still  with  freedom  for  the  individual  to  choose  between  them. 
The  collectivists  have  at  any  rate  made  no  attempt  to  disguise 
the  fact.  They  look  upon  it  merely  as  a  temporary  concession  to 
the  cowardice  of  the  small  proprietor,  who  will  presently  willingly 
abandon  his  own  miserable  bit  of  property  in  order  to  share  in  the 
benefits  of  the  new  regime,  or  who  will  at  any  rate  be  put  out  of 
the  running  by  its  economic  superiority.  But  since  the  prospects 
do  not  seem  very  attractive  to  those  immediately  concerned,  it 
may  be  as  well  to  dispense  with  any  further  consideration  of  the 
subject. 

But  there  is  another  question.  What  has  become  of  the  class 
struggle  in  Neo-Marxism  ?  The  doctrine,  though  not  altogether 
denied,  is  no  longer  presented  as  a  deadly  duel  between  two  classes 
and  only  two,  but  as  a  kind  of  confused  milee  involving  a  great 
number  of  classes,  which  makes  the  issue  of  the  conflict  very  uncer- 
tain. The  picture  of  society  as  consisting  merely  of  two  super- 
imposed layers  is  dismissed  as  being  altogether  too  elementary.  On 
the  contrary,  what  we  find  is  increasing  differentiation  even  within 
the  capitalist  class  itself.  There  is  a  perpetual  conflict  going  on 
between  borrower  and  lender,  between  manufacturer  and  merchant, 
between  trader  and  landlord,  the  last  of  which  struggles  is  especially 
prominent  in  the  annals  of  politics.  It  has  a  long  history,  but  in 
modern  times  it  takes  the  form  of  a  political  battle  between  the  Con- 
servative and  Liberal  parties,  between  Whigs  and  Tories.  These 
undercurrents  complicate  matters  a  great  deal,  and  on  occasion  they 
have  a  way  of  dramatically  merging  with  the  main  current,  when 
both  parties  seek  the  help  of  the  proletariat.  In  England,  for 
example,  the  manufacturers  succeeded  in  repealing  the  Corn  Laws, 
which  dealt  a  hard  blow  at  the  landed  proprietors,  who  in  turn 
passed  laws  regulating  the  conditions  of  labour  in  mines  and  factories. 
In  both  cases  the  working  classes  gained  something — tertius  gaudens  / 
Then  there  are  the  struggles  among  the  working  classes  them- 
selves. Not  to  speak  of  the  bitter  animosity  between  the  syndicate 
rouges  and  the  syndicate  jaunes,  there  is  the  rivalry  between  syndi- 
calists and  non-syndicalists,  between  skilled  workmen  and  the 
unskilled.  As  Leroy-Beaulieu  remarks,  not  only  have  we  a  fourth 
estate,  but  there  are  already  signs  of  a  fifth. 

And  what  of  the  great  catastrophe  ?  The  Neo-Marxians  no 
longer  believe  in  it.  The  economic  crises  which  furnished  the 


THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS    479 

principal  argument  in  support  of  the  catastrophic  theory  are  by  no 
means  as  terrible  as  they  were  when  Marx  wrote.  They  are  no  longer 
regarded  as  of  the  nature  of  financial  earthquakes,  but  much  more 
nearly  resemble  the  movements  of  the  sea,  whose  ebb  and  flow  may 
to  some  extent  be  calculated. 

And  the  materialistic  conception  of  history  ?  "  Every  unbiased 
person  must  subscribe  to  that  formula  of  Bernstein  :  The  influence 
of  techni  co-economic  evolution  upon  the  evolution  of  other  social 
institutions  is  becoming  less  and  less."  *  What  a  number  of  proofs 
of  this  we  have  !  Marxism  itself  furnishes  us  with  some.  The 
principle  of  class  war  and  the  appeal  to  class  prejudice  owe  much 
of  the  hold  which  they  have  to  a  feeling  of  antagonism  against 
economic  fatalism.  In  other  words,  they  draw  much  of  their 
strength  from  an  appeal  to  a  certain  ideal.  It  is,  of  course,  true 
that  facts  of  very  different  character,  economic,  political,  and  moral, 
react  upon  one  another,  but  can  anyone  say  that  some  one  of  them 
determines  all  the  others  ?  Economists  have  been  forced  to  recog- 
nise this,  and  the  futile  attempt  to  discover  cause  or  effect  has 
recently  given  place  to  a  much  more  promising  search  for  purely 
reciprocal  relations. 

It  is  by  no  means  easy  to  determine  how  much  Marxism  there 
is  in  Neo-Marxism.  "  Is  there  anything  beyond  the  formulae  which 
we  have  quoted,  and  which  are  becoming  more  disputable  every 
day  ?  Is  it  anything  more  than  a  philosophical  theory  which 
purports  to  explain  the  conflicts  of  society  ?  "  a  Bernstein  tells  us 
somewhere  that  socialism  is  just  a  movement,  and  that  "  the  move- 
ment is  everything,  the  end  is  nothing."  * 

2.  THE  NEO-MARXIAN  SYNDICALISTS 

Doctrinaire  Marxism  seemed  languishing  when  a  number  of 
professed  disciples  found  a  fresh  opportunity  of  reviving  its  ideals 
and  of  justifying  its  aims  in  a  new  movement  of  a  pre-eminently 
working-class  character  known  as  Syndicalism. 

Our  concern  is  not  with  the  reformist  movement,  occasionally 
spoken  of  as  Trade  Unionism,  which  constitutes  the  special  province 
of  M.  Bernstein  and  the  Neo-Marxians  of  his  school,4  but  rather  with 

1  Sorel,  Lea  Polimiques  pour  V Interpretation  du  Marxisme,  in  the  Revue  inter- 
nationale  de  Sociologie,  1900. 

1  Sorel,  Decomposition  du  Marxisme,  p.  33. 

*  Socialism*  et  Social-dimocratie,  p.  234.  We  have  recently  been  told  that 
syndicalism  is  just  a  literal  application  of  Bergson's  philosophy. 

4  This  point  of  view  is  very  neatly  expressed  in  an  article  of  M.  Berth's 
(Mouvement  aoc.ialiste,  May  1908,  p.  393) :  "  From  a  purely  negative  or  critical 


480  MARXISM 

militant  syndicalism,  which  as  yet  scarcely  exists  anywhere  except 
in  France  and  Italy,  and  which  in  France  is  represented  by  the 
Confederation  generale  du  Travail. 

What  connection  is  there  between  Marxism  and  syndicalism  ? 
Of  conscious,  deliberate  relationship  there  is  scarcely  any.  The  men 
who  direct  the  Confederation  have  never  read  Marx,  possibly,  and 
would  hardly  concern  themselves  with  the  application  of  his  doctrines. 
On  the  other  hand,  we  have  recently  been  told  that  the  programme 
of  the  Confederation  generale  du  Travail  (C.G.T.)  is  in  strict  con- 
formity with  the  Marxian  doctrine  ;  that  since  the  reforming  passion 
has  so  seized  hold  of  the  Neo-Marxians  as  to  drive  them  to  undermine 
the  older  doctrine  altogether,  it  is  necessary  to  turn  to  the  new  school 
to  find  the  pure  doctrine.  They  make  the  further  claim  of  having 
aroused  new  enthusiasm  for  the  Marxian  doctrines. 

(a)  In  the  first  place  they  have  re-emphasised  the  essentially 
proletarian  character  of  socialism.  Not  only  is  there  to  be  no 
dealing  with,  capitalist  or  entrepreneur,  but  no  quarter  is  to  be  given 
to  the  intellectuals  or  the  politicians.  The  professional  labour 
syndicate  is  to  exclude  everyone  who  is  not  a  workman,  and  it 
has  no  interest  at  heart  other  than  that  of  the  working  class.1 
Contempt  for  intellectualism  is  a  feature  of  Marxism,  and  so  is  the 
emphasis  laid  upon  the  beauty  and  worth  of  labour,  not  of  every 
kind  of  labour,  but  merely  of  that  labour  which  moulds  or  transforms 
matter — that  is,  of  purely  manual  labour. 

No  institution  seems  better  fitted  to  develop  class  feeling — 
that  is,  the  sense  of  community  of  interests  binding  all  the  prole- 
tarians together  against  the  owners — than  the  syndicat.  Organisa- 
tion is  necessary  if  social  consciousness  is  to  develop.  This  is  as 
true  in  the  economic  as  it  is  in  the  biological  sphere,  and  this  is  why 
the  syndicat  is  just  what  was  needed  to  transform  the  old  socialistic 

point  of  view  we  agree  with  Bernstein  rather  than  the  orthodox  Kaufcsky.  But 
what  does  Bernstein  propose  to  substitute  for  the  revolutionary  ideal — impractic- 
able as  it  was — of  the  German  Social  Democratic  party  ?  The  alternative 
offered  is  a  simple  democratic,  reformist  evolution,  a  political  or  economic 
development  which  would  just  be  a  pale  imitation  of  the  bourgeois  Liberal  regime, 
which  it  is  hoped  would  result  in  the  emancipation  of  the  workers  by  getting  rid 
of  bourgeois  Liberalism  altogether.  The  complete  democratisation  of  politics  and 
economics  would,  it  is  hoped,  effect  the  necessary  improvement.  On  this  point 
we  syndicalists  must  definitely  part  company  with  Bernstein  and  his  confreres, 
for  what  we  want  is  not  a  mere  evolution,  but  a  revolutionary  creation  of  new 
aocial  forms." 

1  "  An  organisation  of  producers  who  will  be  able  to  manage  their  own  affairs 
without  having  recourse  to  the  superior  knowledge  which  the  typical  bourgeois 
ic  supposed  to  possess."  (Sorel,  Decomposition  du  Marxisme,  pp.  60-61.] 


THE  MARXIAN  CRISIS  AND  THE  NEO-MARXIANS    481 

conception  into  real  socialism.  Marx  could  not  possibly  have  fore- 
seen the  vast  potentialities  of  the  syndicat.  If  he  had  only  known 
it  how  his  heart  would  have  rejoiced  !  The  Neo-Marxians  can 
never  speak  of  syndicalism  without  going  into  raptures.  No  other 
new  source  of  energy  seems  left  in  this  tottering  middle-class  system. 
But  syndicalism  has  within  it  the  promise  of  a  new  society,  of  a  new 
philosophy,  even  of  a  new  code  of  morality  which  we  may  call 
producers'  ethics,  which  will  have  its  roots  in  professional  honour, 
in  the  joy  that  comes  from  the  accomplishment  of  some  piece  of 
work,  and  in  their  faith  in  progress.1 

(6)  New  stress  has  been  laid  upon  the  philosophy  of  class  war, 
and  a  fresh  appeal  has  been  made  for  putting  it  into  practice.  The 
only  real,  sensible  kind  of  revolution  is  that  which  must  sooner  or 
later  take  place  between  capitalists  on  the  one  hand  and  wage- 
earners  on  the  other,  and  this  kind  of  revolution  can  only  be  effected 
by  appealing  to  class  feeling  and  by  resorting  to  every  instrument 
of  conflict,  strikes,  open  violence,  etc.  All  attempts  at  establishing 
an  understanding  with  the  bourgeois  class,  every  appeal  for  State 
intervention  or  for  concessions,  must  be  abandoned.  Explicit  trust 
must  be  placed  in  the  method  of  direct  action.2 

Strife  is  to  be  the  keynote  of  the  future,  and  in  the  pending 
struggle  every  trace  of  bourgeois  legalism  will  be  ruthlessly  swept  ^ 
aside.     The  fighting  spirit  must  be  kept  up,  not  with  a  view  to  the 

1  "  Revolutionary  syndicalism  is  the  great  educative  force  •which  contem- 
porary society  has  at  its  disposal  to  prepare  it  for  the  tasks  which  await  it." 
(Sorel,  Reflexions  sur  la  Violence,  p.  244 ;  1909.) 

"  In  the  general  ruin  of  institutions  something  new  and  powerful  will  remain 
intact.  This  will  be  what  is  generally  known  as  the  proletarian  soul,  which 
it  is  hoped  will  survive  the  general  reassessment  of  moral  values,  but  that  will 
depend  on  the  energy  displayed  by  the  workers  in  resisting  the  corruption  of 
the  bourgeoisie  and  in  meeting  their  advances  with  the  most  unmistakable 
hostility."  (Ibid.,  p.  253.) 

It  is  altogether  a  different  point  of  view  from  that  of  the  consumer,  the 
shareholder,  or  the  "  literary  idler,"  who  are  only  interested  in  the  success  of 
buyers'  social  leagues,  or  in  consumers'  societies.  Cf.  p.  342. 

1  This  incessant  struggle  is  what  Sorel  has  named  violence,  which  he  thinks  is 
peculiarly  healthy.  "  I  have  shown,"  says  he,  "  that  proletarian  violence  has 
an  entirely  different  significance  from  that  usually  attributed  to  it  by  politicians 
and  amateur  students  of  society."  It  is  incorrect,  however,  to  say  that  he  is 
in  favour  of  sabotage.  "  Sabotage,"  says  Sorel,  "  belongs  to  the  old  regime. 
but  does  nothing  to  set  the  worker  in  the  way  of  emancipation."  (Mouvemei  t 
socialiste,  1905,  November  1  and  15.) 

One  cannot  fail  to  see  the  antagonism  which  exists  in  France  between  the 
Sooialistcs  Unifies  (which  is  largely  recruited  from  the  old  Marxian  party) 
arid  the  syndicalists,  who  condemn  both  universal  suffrage  and  parliamentary 
action, 
n>.  Q' 


482  MARXISM 

intensification  of  class  hatred,  but  simply  in  order  to  hand  on 
the  torch. 

The  struggle  has  hitherto  been  the  one  concern  of  the  revolutionary 
syndicalists.  Unlike  the  socialists,  they  have  never  paid  any 
attention  either  to  labour  or  to  social  organisation.  All  this  has, 
fortunately,  been  done  by  the  capitalist,  and  all  that  is  required 
now  is  simply  to  remove  him.1 

(c)  Nor  has  the  catastrophic  thesis  been  forgotten.  This  time 
it  has  been  revived,  not  in  the  form  of  a  financial  crisis,  but  in 
the  guise  of  a  general  strike.  What  will  all  the  bourgeois  general- 
ship, all  the  artillery  of  the  middle  class,  avail  in  a  struggle  of 
that  kind  ?  What  is  to  be  done  when  the  worker  just  folds  his 
arms  and  instantly  brings  all  social  life  to  a  standstill,  thus  proving 
that  labour  is  really  the  creator  of  all  wealth  ?  And  although 
one  may  be  very  sceptical  as  to  the  possibility  of  a  general  strike — 
the  scepticism  is  one  that  is  fully  shared  in  by  the  syndicalists 
themselves — still  this  "  myth,"  as  Sorel  calls  it,  must  give  a  very 
powerful  stimulus  to  action,  just  as  the  Christians  of  the  early 
centuries  displayed  wonderful  activity  in  view  of  their  expectation 
of  the  second  coming  of  Christ. 

The  word  "  myth  "  has  been  a  great  success,  not  so  much  among 
working  men,  to  whom  it  means  nothing  at  all,  but  among  the 
intellectuals.  It  is  very  amusing  to  think  that  this  exclusively 
working-class  socialism,  which  is  not  merely  anti-capitalist,  but  also 
violently  anti-intellectual,  and  which  is  to  "  treat  the  advances  of 
the  bourgeoisie  with  undisguised  brutality,"  is  the  work  of  a  small 
group  of  "  intellectuals "  possessed  of  remarkable  subtlety,  and 
even  claiming  kinship  with  Bergsonian  philosophy.8  A  myth 
perhaps  !  But  what  difference  is  there  between  being  under  the 
dominion  of  a  myth  and  following  in  the  wake  of  a  star  such  as 
guided  the  wise  men  of  the  East,  or  being  led  by  a  pillar  of  flame 
or  a  cloud  such  as  went  before  the  Israelites  on  their  pilgrimage 
towards  the  Promised  Land  ?  8  Such  faith  and  hope  borrowed  from 

1  "  One  no  longer  thinks  of  drawing  up  a  scheme  which  shall  determine  the 
way  in  which  people  in  the  future  are  to  seek  their  own  well-being.  The  problem 
now  is  how  to  complete  the  revolutionary  education  of  the  proletarian."  (Sorel, 
Decomposition  du  Marxisms,  introduction,  p.  37.) 

*  This  group  is  represented  by  the  review  called  Le  Mouvement  socialise, 
which  is  controlled  by  M.  Lagardelle.  Sorel  has  withdrawn  from  the  group  and 
is  now  leading  a  campaign  in  favour  of  Catholic  nationalism. 

The  recent  literature  of  syndicalism  is  very  extenslre.  We  have  already 
mentioned  M.  Guy  Grand's  La  Philosophic  Syndicalistt. 

'  Riflexions  sur  la  Violence,  p.  xxacv.  We  must  note,  however,  that  M.  Sorel 
protests  against  any  confusion  being  made  between  the  myth  as  he  understands 


DOCTRINES  INSPIRED  BY  CHRISTIANITY  488 
the  armoury  of  the  triumphant  Church  of  the  first  century,  such  a 
conception  of  progress  which  swells  its  followers  with  a  generous, 
almost  heroic  passion,  puts  us  out  of  touch  with  the  historic  mate- 
rialism so  dear  to  the  heart  of  Marx  and  brings  us  into  line  with  the 
earlier  Utopian  socialists  whom  he  so  genuinely  despised.  Sorel 
recognises  this.  "  You  rarely  meet  with  a  pure  myth,"  says  he, 
"  without  some  admixture  of  Utopianism." 


CHAPTER  IV:    DOCTRINES  THAT  OWE  THEIR 
INSPIRATION  TO  CHRISTIANITY 

EVERYONE  who  knows  the  Bible  at  all  or  has  the  slightest  acquaint- 
ance with  the  writings  of  the  early  Fathers  must  have  been  struck 
by  the  number  of  texts  which  they  contain  bearing  upon  social  and 
economic  questions.  And  one  has  only  to  recall  the  imprecations 
of  the  prophets  as  they  contemplate  the  misdeeds  of  merchants  and 
the  greed  of  land-grabbers,  or  strive  to  catch  the  spirit  of  the  parables 
of  Jesus  or  the  epistles  of  the  Fathers  concerning  the  duty  of  the  rich 
towards  the  poor — a  point  emphasised  by  Bossuet  in  his  sermon 
on  The  Eminent  Dignity  of  the  Poor — or  dip  into  the  folios  of  the 
Canonists  or  the  Sumrna  of  Aquinas,  to  realise  how  imperative  were 
the  demands  of  religion  and  with  what  revolutionary  vehemence  its 
claims  were  upheld.1 

But  not  until  the  middle  of  the  nineteenth  century  do  we  meet 
with  social  doctrines  of  a  definitely  Christian  type,  and  not  till 
then  do  we  witness  the  formation  of  schools  of  social  thinkers  who 
place  the  teaching  of  the  Gospel  in  the  forefront  of  their  programme, 
hoping  that  it  may  supply  them  with  a  solution  of  current  economic 
problems  and  with  a  plan  of  social  reconstruction.2  It  is  not 
difficult  to  account  for  their  appearance  at  this  juncture.  Their 
primary  object  was  to  bear  witness  to  the  heresy  of  socialism,  and 
the  nature  of  the  object  became  more  and  more  evident  as  socialism 

it  and  Utopian  socialism.  The  myth  is  obviously  superior  in  the  fact  that  it 
cannot  be  refuted,  seeing  that  it  is  merely  the  expression  of  a  conviction.  See 
pp.  xxv  and  218  of  the  same  work. 

1  We  need  only  recall  the  doctrine  of  usury  and  the  legislation  on  the  ques- 
tion— all  of  it  the  outcome  of  Canonist  teaching. 

1  A  Catholic  professor — long  since  forgotten — of  the  name  of  de  Coux  wrote  as 
follows  in  a  book  entitled  Easai  d"  Economic  politique,  published  in  1832:  "The 
practical  application  of  Catholicism  would  result  in  the  finest  system  of  social 
economy  that  the  world  has  ever  seen." 


484        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

tended  to  become  more  materialistic  and  anti-Christian.  It  became 
the  Church's  one  desire  to  win  back  souls  from  the  pursuit  of  this  new 
cult.  It  was  the  fear  of  seeing  the  people — her  own  people — enrol 
themselves  under  the  red  flag  of  the  Anti-Christ  that  roused  her 
ardour.1  But  to  regard  it  as  a  mere  question  of  worldly  rivalry 
would  be  childish  and  misleading.  Rather  must  we  see  in  it  a 
reawakening  of  Christian  conscience  and  a  searching  of  heart  as 
to  whether  the  Church  herself  had  not  betrayed  her  Christ,  and  in 
contemplation  of  her  heavenly  had  not  forgotten  her  earthly  mission. 
which  was  equally  a  part  of  her  message  ;  whether  in  repeating  the 
Lord's  Prayer  for  the  coming  of  the  Kingdom  and  the  giving  of  daily 
bread  she  had  forgotten  that  the  Kingdom  was  to  be  established 
on  earth  and  that  the  daily  bread  meant,  not  charity,  but  the  wages 
of  labour. 

Both  doctrines  and  schools  are  of  a  most  heterogeneous  character, 
ranging  from  authoritative  conservatism  to  almost  revolutionary 
anarchism,  and  it  will  not  be  without  some  effort  that  we  shall 
include  them  all  within  the  limits  of  a  single  chapter.  But  it  is 
not  impossible  to  point  to  certain  common  characteristics,  both 
positive  and  negative,  which  entitle  us  to  regard  them  all  as  members 
of  one  family. 

As  a  negative  trait  we  have  their  unanimous  repudiation  of 
Classical  Liberalism.  This  does  not  necessarily  imply  a  disposition 
to  invoke  State  aid,  for  some  of  them,  as  we  shall  see,  are  opposed 
even  to  the  idea  of  a  State.  Neither  does  it  imply  a  denial  of  a 
"  natural  order,"  for  under  the  name  of  Providence  and  as  a 
manifestation  of  the  will  of  God  the  "  order  "  was  a  source  of 
perennial  delight  to  them.  But  man  was  to  them  an  outcast  without 
lot  or  portion  in  the  "  order."  Fallen  and  sinful,  bereft  of  his 
freedom,  it  was  impossible  that  of  himself  he  should  return  to  his 
former  state  of  bliss.  To  leave  the  natural  man  alone,  to  deliver 
him  over  to  the  pursuit  of  personal  interest  in  the  hope  that  it 
might  lead  him  to  the  good  or  result  in  the  rediscovery  of  the  lost 
way  of  Paradise,  was  clearly  absurd.  It  was  as  futile  in  the  economic 
as  it  was  in  the  religious  sphere.  On  the  contrary,  the  Christian 
schools  maintained  that  the  "  natural "  man,  the  old  man,  the 

1  "  Catholicism  alone  has  the  necessary  cohesion  and  power  to  withstand 
socialism,  which  has  been  erected  upon  the  ruins  of  the  Liberal  system."  (Comte 
de  Mun,  La  Question  sociale  au  XI  Xe  Sitele,  1900.) 

"  There  is  no  need  to  think  of  the  Church  as  a  kind  of  gendarme  in  cassock 
flinging  itself  against  the  people  in  the  interest  of  capital.  Rather  it  should  be 
understood  that  it  is  working  in  the  interests  and  solely  for  the  defence  of  the 
weak."  (Comte  de  Mun,  Discours,  April  1893.) 


DOCTRINES  INSPIRED  BY  CHRISTIANITY        485 

first  Adam  of  the  New  Testament,  must  somehow  be  got  rid  of 
before  room  could  be  found  for  the  new  man  within  us.  Every 
available  force,  whether  religious,  moral,  or  merely  social,  must  be 
utilised  to  keep  people  from  the  dangerous  slope  down  which  egoism 
would  inevitably  lead  them.1 

The  new  doctrines  are  also  distinct  from  socialism,  despite  the  fact 
that  their  followers  frequently  outbid  the  socialists  in  the  bitterness  of 
their  attacks  upon  capital  and  the  present  organisation  of  society. 
They  refuse  to  believe  that  the  creation  of  a  new  society  in  the  sense 
of  a  change  in  economic  conditions  or  environment  is  enough.  The 
individual  must  also  be  changed.  To  those  who  questioned  Christ 
as  to  when  the  Kingdom  of  God  should  come,  He  replied,  "The 
kingdom  of  God  cometh  not  with  observation  .  .  .  for,  behold,  the 
kingdom  of  God  is  within  you,"  and  His  answer  is  witness  to  the 
fact  that  social  justice  will  only  reign  when  it  has  achieved  victory 
over  human  hearts.  Social  Christianity  must  never  be  compared 
with  the  socialism  of  the  Liberals  or  the  Associationists,  for  the  latter 
believed  man  to  be  naturally  good  apart  from  the  deteriorating 
effects  of  civilisation.  Nor  must  it  ever  be  classed  with  the  col- 
lectivism of  Marx,  which  has  its  basis  in  a  materialistic  conception 
of  history  and  class  war.  Some  of  these  Christian  authors,  it  is 
true,  regard  State  Socialism  with  a  certain  degree  of  favour  and 
would  possibly  welcome  co-operation,  but  to  most  of  them  legal 
coercion  does  not  seem  very  attractive  and  they  prefer  to  put  their 
faith  in  associations  such  as  the  family,  the  corporation,  or  the 
co-operative  society.  We  could  hardly  expect  otherwise,  seeing 
that  every  church  is  an  organisation  of  some  kind  or  other.  The 
Catholic  Church  especially,  whatever  opinion  we  may  have  of  it,  is 
at  once  the  greatest  and  the  noblest  a&sociation  that  ever  existed. 
Its  bonds  are  even  stronger  than  death.  The  Church  militant 
below  joins  hands  with  the  Church  triumphant  above,  the  living 
praying  for  the  dead  and  the  dead  interceding  for  the  living. 

1  The  Social  Christians  somewhere  make  the  remark  that  even  if  the  orthodox 
account  of  creation  is  destined  to  disappear  before  the  onslaughts  of  the  evolu- 
tionary theory  and  Adam  makes  way  for  the  gorilla,  the  problem  would  merely  be 
intensified,  for  it  would  still  b«  necessary  to  get  rid  of  the  "  old  man."  "  We  live," 
says  Brunetiere,  "  in  the  strength  of  the  victories  won  over  the  more  primitive 
instincts  of  our  nature  "  (Revue  dea  Deux  Mondts,  May  I,  1895). 

Kidd  in  his  Social  Evolution,  a  work  which  attracted  gi  at  attention  when  it 
was  first  published  in  1894,  attempts  to  apply  the  Darwinian  theory  to  Chris- 
tianity. He  accepts  the  Darwinian  hypothesis  that  the  struggle  for  existence 
and  natural  selection  constitute  the  mainsprings  of  progress.  But  the  struggle 
may  demand,  or  the  selection  involve,  the  sacrifice  of  individual  to  collective 
interest,  and  the  only  force  which  can  inspire  such  sacrifice  is  religion. 


486        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

.  From  a  constructive  standpoint  they  defy  classification.  They 
have  a  common  aspiration  in  their  hope  of  a  society  where  all  men 
will  be  brothers,  children  of  the  one  Heavenly  Father,1  but  many 
are  the  ways  of  attaining  this  fraternal  ideal.  In  the  same  spirit 
they  speak  of  a  just  price  and  a  fair  wage  much  as  the  Canonists 
of  the  Middle  Ages  did.  In  other  words,  they  refuse  to  regard 
human  labour  as  a  mere  commodity  whose  value  varies  according 
to  the  laws  of  supply  and  demand.  The  labour  of  men  is  sacred, 
and  Roman  law  even  refused  to  recognise  bartering  in  res  sacras. 
But  when  it  becomes  a  question  of  formulating  means  of  doing  this, 
the  ways  divide.  Numerous  as  are  the  Biblical  texts  which  bear  upon 
social  and  economic  questions,  they  are  extraordinarily  vague.  At  least 
they  seem  capable  of  affording  support  to  the  most  divergent  doctrines. 
Some  might  consider  it  a  mistake  to  devote  a  whole  chapter  to 
these  doctrines,  seeing  that  they  are  moral  rather  than  economic, 
and  that,  with  perhaps  the  exception  of  Le  Play,  who  is  only  indirectly 
connected  with  this  school,  we  have  no  names  that  can  be  compared 
with  those  already  mentioned.  But  not  a  few  intellectual  move- 
ments, are  of  an  anonymous  character.  The  importance  of  a 
doctrine  ought  not  to  be  measured  by  the  illustrious  character  of 
its  sponsor  so  much  as  by  the  effect  which  it  has  had  upon 
the  minds  of  men.  No  one  will  be  prepared  to  deny  the  influ- 
ence which  these  doctrines  have  exercised  upon  religious  people,  an 
influence  greater  than  either  Fourier's,  Saint-Simon's,  or  Proudhon's. 
Moreover,  they  are  connected  with  the  development  of  important 
economic  institutions,  such  as  the  attempt  to  revive  the  system  of 
corporations  in  Austria,  the  establishment  of  rural  banks  in  Germany 
and  France,  the  development  of  co-operative  societies  in  England, 
the  growth  of  temperance  societies,  the  agitation  for  Sunday  rest,  etc. 
Nor  must  we  forget  that  the  pioneers  of  factory  legislation,  the 
founders  of  workmen's  institutes,  men  like  Lord  Shaftesbury  in 
England,  Pastor  Oberlin,  and  Daniel  Legrand  the  manufacturer, 
were  really  Christian  Socialists. 

I :   LE  PLAY'S  SCHOOL 

LE  PLAY'S     school  is  very  closely  related  to  the  Classical  Liberal, 

some  of  its  best  known  representatives  actually  belonging  to  both. 

1  It  was  no  Christian  Socialist,  but  Auguste  Comte,  the  founder  of  Positivism, 
who  wrote  :  "  The  original  equality  of  men  is  not  a  doctrine  founded  simply  upon 
the  observation  of  social  facts.     It  was  only  clearly  affirmed  for  the  first  time  by 
Christianity."     (Traiti  de  Politique,  vol.  i,  p.  407.) 

2  Frederic  Le  Play  (1806-82)  was  a  mining  engineer,  and  was  educated  at  the 
fJcole  polytechnique.     He  subsequently  became  a  professor  at  the  Ecole  des  Mines 


LE  PLAY'S  SCHOOL  487 

There  is  the  same  antipathy  to  socialism  and  the  same  dread  of 
State  intervention. 

But  it  is  not  difficult  to  differentiate  from  the  more  extreme 
Liberal  school  which  finds  its  most  optimistic  expression  in  the 
works  of  certain  French  writers.  The  cardinal  doctrine  of  that 
school,  namely,  that  individual  effort  is  alone  sufficient  for  all  things, 
finds  no  place  in  Le  Play's  philosophy.  Man,  it  seemed  to  him, 
was  ignorant  of  what  his  own  well-being  involved.  In  the  realm 
of  social  science  no  fact  seemed  more  persistent  or  more  patent 
than  error.  Every  individual  appeared  to  be  born  with  a  natural 
tendency  to  evil,  and  he  picturesquely  remarks  that  "  every  netf 
generation  is  just  an  invasion  of  young  barbarians  that  must  be 
educated  and  trained.  Whenever  such  training  is  by  any  chance 
neglected,  decadence  becomes  imminent."  1 

Among  the  errors  more  particularly  denounced  by  Le  Play  were 
the  special  idols  of  the  French  bourgeois — the  "  false  dogmas  of 
'89  "  as  he  calls  them.2  It  seemed  to  him  that  no  society  could 
ever  hope  to  exist  for  any  length  of  time  and  still  be  content  with 
the  rule  of  natural  laws,  which  merely  meant  being  ruled  by  the 
untamed  instincts  of  the  brute.  It  must  set  to  and  reform  itself. 
Hence  his  book  is  entitled  Social  Reform,  and  the  school  which 
he  founded  adopted  the  same  title. 

Some  kind  of  authority  is  clearly  indispensable ;  the  question 
is  what  it  should  be.  The  old  paterfamilias  relation  immediately 
suggests  itself  as  being  more  efficacious  than  any  other,  seeing  that 

and  a  Counseiller  d'fitat.  In  1855  he  published  a  collection  of  monographs  dealing 
with  working-class  families  under  the  title  of  Lea  Ouvriera  europ&ens,  in  one  volume 
(the  second  edition,  which  appeared  in  1877,  consisted  of  six  volumes).  In  1864 
he  published  an  exposition  of  his  social  creed  in  La  Reforme  sociale,  a  book  that 
Montalembert  declared  to  be  "  the  most  original,  the  most  courageous,  the  most 
useful,  and  altogether  the  most  powerful  book  of  the  century."  It  hardly  deserves 
such  extravagant  praise,  perhaps,  but  it  is  true  that  many  of  its  more  pessimistic 
prophecies  concerning  the  future  of  France  have  been  very  curiously  verified. 

In  1856  Le  Play  founded  La  Societe  d'Fxxmomie  sociale,  which  since  1881  has 
been  responsible  for  the  publication  of  La  Reforme  sociale.  He  organised  the 
Universal  Exhibition  in  1867,  and  was  one  of  the  first  to  arrange  exhibitions  of 
social  work.  For  a  resume  of  his  life  and  work  see  Frederic  Le  Play  d'aprea  lui- 
meme,  by  Auburtin  (Paris,  1906). 

1  Programme  des  Unions  de  la  Paix  sociale,  chap.  1. 

1  "  The  gravest  and  most  dangerous  error  of  all,  and  one  that  has  been  the 
parent  of  all  our  revolutions,  is  the  false  principle  which  the  innovators  of  1789 
would  put  into  practice  and  which  affirms  the  original  perfection  of  mankind.  It 
also  encourages  the  belief  that  a  society  composed  of  '  natural '  men  would  enjoy 
peace  and  happiness  without  any  effort  at  all,  and  that  these  desiderata  are  just  the 
spontaneous  outcome  of  every  free  society." 


488        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

it  is  founded  in  nature  and  not  on  contract  or  decree,  and  springs 
from  love  rather  than  coercion.  The  family  group  under  the 
authority  of  its  chief,  which  was  the  sole  social  unit  under  the 
patriarchal  system,  must  again  be  revived  in  the  midst  of  our 
complex  social  relations.  But  parental  control  cannot  always  be 
relied  upon,  for  the  parent  is  frequently  engrossed  with  the  other 
demands  of  life,  and  there  is  positive  need  for  some  social  authority. 
This  new  social  authority  will  not  be  the  State — that  is,  if  Le  Play 
can  possibly  avoid  it.  The  first  chance  will  be  given  to  "  natural  " 
authorities — those  authorities  which  rise  up  spontaneously.  The 
nobility  is  well  fitted  for  the  task  where  it  exists.  In  the  absence  of 
nobility,  or  where,  as  was  unfortunately  the  case  in  France,  they 
were  impervious  to  a  sense  of  duty,  society  must  fall  back  upon  the 
landed  proprietors,  the  employers,  and  persons  of  ripe  judgment — 
men  who  hardly  deserve  the  title  of  savants,  but  nevertheless  with 
considerable  experience  of  life.  Failing  these  it  could  still  appeal 
to  the  local  authorities,  to  those  living  nearest  the  persons  concerned, 
to  the  parish  rather  than  the  county,  the  county  rather  than  the 
State.  State  intervention  is  indispensable  only  when  all  other 
authorities  have  failed — in  the  enforcement  of  Sunday  observance, 
for  example,  where  the  ruling  classes  have  shown  a  disposition  to 
despise  it.  The  necessity  for  State  intervention  is  evidence  of 
disease  within  the  State,  and  the  degree  of  intervention  affords  some 
index  of  the  extent  of  the  malady. l 

Seeing  that  he  attaches  such  importance  to  the  constitution  of 
the  family,  Le  Play  is  also  bound  to  give  equal  prominence  to  the 
question  of  entail,  which  determines  the  permanence  of  the  family. 
Herein  lies  the  kernel  of  Le  Play's  system.  He  distinguishes  three 
types  of  families : 

1.  The  patriarchal  family.    The  father  is  the  sole  proprietor,  or, 
more  correctly,  he  is  the  chief  administrator  of  all  family  affairs. 
At  his  death  all  goods  pass  by  full  title  to  the  eldest  son.    Such  is 
the  most  ancient    form   of  government  of   which   we    have  any 
record.       It  is  the  political  counterpart  of  the   pastoral   regime, 
and  both  may  still   be    seen    in   full    operation   on  the  Russian 
steppes. 

2.  The  family  group.     Children  and   grandchildren  no  longer 
remain  under  paternal  authority  throughout  life.     With  a  single 
exception  they  leave  the  family  hearth  and  proceed  to  found  new 

1  "  It  is  the  great  misfortune  of  France  that  the  family  should  be  immersed  in 
the  commune,  the  commune  in  the  department,  the  department  in  the  State." 
(L(t  It  if  or  me  sociale,  vol.  iii,  Book  VIL) 


LE  PLAY'S  SCHOOL  489 

homes.  Whoever  remains  at  home  becomes  the  heir,  after  first 
becoming  his  father's  associate  during  the  latter's  lifetime.  He 
becomes  the  new  head  of  the  family  by  paternal  wish,  and  not  of 
legal  right  or  necessity.  The  property  thus  passes  to  the  worthiest, 
to  him  who  is  thought  best  able  to  preserve  it.  It  is  this  rtgimc, 
Le  Play  thinks,  that  explains  the  extraordinary  stability  of  China ; 
and  the  same  system,  though  somewhat  shaken,  is  the  source  of 
England's  strength  and  vitality.  There  were  some  parts  of  France 
where,  in  spite  of  the  Civil  Code,  a  similar  system  was  still  in  vogue. 
There  was  one  such  family  in  particular,  that  of  the  Pyrenean 
peasant  Melouga,  whose  history  showed  a  wonderful  continuity, 
and  the  story  of  that  family  recurs  as  a  kind  of  leitmotiv  through 
the  whole  of  the  writings  of  Le  Play  and  his  immediate  disciples. 
The  Melouga  family  has  since  become  extinct. 

8.  The  unstable  family,  where  all  the  children,  as  soon  as  they 
arrive  at  maturity,  quit  the  home  and  set  up  for  themselves.  At 
the  father's  death  the  family,  already  scattered,  is  completely  dis- 
solved. The  patrimony  is  divided  equally  between  all  its  members, 
and  any  business  which  the  father  may  have  possessed,  whether 
agricultural  or  industrial,  goes  into  immediate  liquidation.  This  is 
the  regime  born  of  individualism  which  is  characteristic  of  all 
modern  societies,  especially  France. 

Le  Play's  sympathy  is  entirely  with  the  second,  for  the  family 
group  seems  to  hold  the  balance  evenly  between  the  two  antagonistic 
forces  which  are  both  indispensable  for  the  welfare  of  society, 
namely,  the  spirit  of  conservatism  and  the  spirit  of  innovation. 
Under  the  patriarchal  system  the  former  preponderates,1  while 
under  the  regime  of  the  unstable  family  it  is  utterly  wanting.  The 
latter  reminds  us  of  Penelope's  web — each  generation  making  a 
fresh  beginning.  But  this  periodical  division  of  wealth  fails  to 
give  the  desired  degree  of  equality,  for  the  removal  of  every 
trace  of  solidarity  between  the  members  means  that  the  one  may 
become  rich  and  the  other  sink  into  poverty.  Everyone  fights  for 
his  own  hand.  Moreover,  when  children  only  remain  with  their 
parents  for  just  a  short  period  of  tutelage  there  is  a -powerful  incentive 
given  to  race-suicide,  as  is  clearly  shown  in  the  case  of  France.  As 
soon  as  the  offspring  find  themselves  in  a  position  of  self-sufficiency 

1  "  It  [the  patriarchal  regime]  in  all  matters  relating  to  economic  action  or 
to  social  life  shows  greater  attachment  to  the  past  than  concern  for  the  future. 
Obedience  is  the  keynote  rather  than  initiation.  The  family  group  tends  to  arrest 
the  enterprise  which  would  characterise  the  action  of  the  more  independent 
members  of  the  family  in  a  somewhat  freer  atmosphere."  (La  Riformt  locialt, 
Book  III.) 


490        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

they  leave  the  old  home,  just  as  the  young  animal  does.  Under 
such  circumstances  it  is  clearly  to  the  interest  of  parents  to  have 
as  few  children  as  possible.1 

The  family  group,  on  the  other  hand,  entrusts  its  traditions  and 
their  preservation  to  the  keeping  of  the  child  who  remains  at  home, 
Those  who  leave  have  their  way  to  make,  and  become  heirs  of  that 
industrial  spirit  which  has  made  England  the  mistress  of  the  world. 
True  fraternal  equality  is  also  preserved,  for  the  old  home  always 
remains  open — a  harbour  of  refuge  to  those  who  fail  in  the  industrial 
struggle.  To  mention  but  one  instance,  the  "  old  maid,"  whose  lot 
is  often  exceedingly  hard,  need  never  be  without  a  home. 

Apart  from  moral  reform,  there  seemed  only  one  way  of  estab- 
lishing the  family  group  in  France,  namely,  by  greater  freedom  of 
bequest,  or  at  the  very  least  by  increasing  the  amount  of  goods  that 
may  be  given  to  any  one  child,  so  that  a  father  might  be  able  to 
transmit  the  whole  of  his  land  or  his  business  to  any  one  of  his 
children  on  condition  that  the  heir  fairly  indemnified  each  of  his 
brothers  should  their  respective  shares  be  insufficient.2 

A  father's  authority  over  his  children  is  an  indispensable  element 
in  the  stability  of  society,  and  a  master's  authority  over  his  men, 
though  derivative  in  character,  is  scarcely  less  so.  The  continuance 
of  social  peace  largely  depends  upon  the  latter,  and  the  preservation 
of  social  peace  should  be  the  essential  aim  of  social  science.3  We 
are  continually  meeting  with  the  expression  "  social  peace  "  in  the 
writings  of  Le  Play  and  his  school,  and  the  associations  which  they 
founded  became  known  as  "  Unions  of  Social  Peace." 

Play's  first  essay,  an  admirably  planned  Exposition  of  Social 
Economics,  was  published  in  1867.  The  sole  object  of  its  author 
was  to  further  the  establishment  of  such  institutions  as  were  likely 
to  promote  understanding  among  all  persons  employed  in  the 
production  of  the  same  goods.  We  might  even  be  tempted  to  say 
that  the  whole  co-partnership  movement  started  by  Dollfus  at 

1  "  In  short,  I  have  never  met  with  a  social  organisation  which  to  the  same 
extent  vitiates  the  laws  both  of  nature  and  morality." 

1  Le  Play,  who  had  some  influence  over  Napoleon  IH,  tried  to  get  him  to 
consent  to  some  such  modification  of  the  Civil  Code.  But  the  Emperor,  though 
favourably  inclined,  and  despot  as  he  was,  dared  not  alienate  public  sympathy  in 
the  matter.  And  really  fathers  seldom  exercise  the  full  authority  which  the  law 
gives  them  even  now.  The  evil,  then,  if  it  is  an  evil,  is  deeper  than  Le  Play 
imagined,  and  seems  to  be  moral  rather  than  legal. 

3  "  Human  societies  should  aim  not  so  much  at  the  creation  of  wealth  as  such, 
but  rather  at  increasing  the  well-being  of  mankind.  Well-being  includes  daily 
bread,  but  it  does  not  exclude  social  peace."  (Claudio  Jannet  in  a  lecture  on  Lea 
Quaire  Scales  cT Economic  tociale.) 


LE  PLAY'S  SCHOOL  491 

Mulhouse  in  1850  with  the  utterance  of  the  famous  phrase,  "  The 
master  owes  something  to  the  worker  beyond  his  mere  wages,"  was 
inspired  by  Le  Play.1  Le  Play  pinned  his  faith  to  the  benevolent 
master.  It  was  quite  natural  that  the  apostle  of  the  family  group 
should  regard  the  factory  as  possessing  a  great  deal  of  the  stability 
and  many  of  the  other  characteristics  of  the  family,  such  as  its  quasi- 
permanent  engagements2  and  its  various  grades  of  working  men 
all  grouped  together  under  the  authority  of  a  well- respected  chief. 

Le  Play's  thesis  that  the  salvation  of  the  working  classes  can 
only  come  from  above  seems  to  have  even  less  foundation  than  the 
opposite  doctrine  of  syndicalism,  which  claims  that  their  deliver- 
ance is  in  their  own  hands,  and  it  was  once  for  all  refuted  in  a 
brilliant  passage  of  Stuart  Mill's : 3  "No  times  can  be  pointed  out 
in  which  the  higher  classes  of  this  or  any  other  country  performed 
a  part  even  distantly  resembling  the  one  assigned  them  in  this 
theory.  All  privileged  and  powerful  classes  as  such  have  used 
their  power  in  the  interest  of  their  own  selfishness.  ...  I  do 
not  affirm  that  what  has  always  been  must  always  be.  This  at 
least  seems  to  be  undeniable,  that  long  before  the  superior  classes 
could  be  sufficiently  inspired  to  govern  in  the  tutelary  manner 
supposed,  the  inferior  classes  would  be  too  much  improved  to  be  so 
governed." 

Besides  the  master  and  the  State  there  was  still  another  factor 
of  social  progress  which  is  of  prime  importance  at  the  present  time, 
namely,  working  men's  unions.  One  might  reasonably  have  expected 
a  more  sympathetic  treatment  for  them  at  Le  Play's  hands,  especially 
when  we  remember  that  they  were  proscribed  by  the  "  false  dogmas 
of  '89."  But  he  had  little  faith  in  union,  whether  a  corporation  or 
a  co-operative  society.4  Trade  unionism  especially  seemed  rather 
useless,  because  it  tended  to  destroy  the  more  natural  and  more 
efficient  organisation  which  appeared  to  him  to  be  merely  an  exten- 
sion of  the  family  group.  It  is  true  that  Le  Play  never  saw  unionism 

1  We  most  remember  that  these  were  the  orthodox  views  then.  Villerme, 
writing  in  1840  in  his  celebrated  Tableau  de  VStat  moral  et  physique  de»  Ouvriers, 
thought  it  was  the  employers  really  who  could  best  improve  the  circumstances 
and  character  of  the  workers. 

1  We  get  some  idea  of  the  importance  which  he  attributed  to  the  per- 
manence of  engagements  when  we  realise  that  he  contemplated  the  abolition  of 
slavery  with  a  measure  of  regret.  (La  Reforme  eociale.) 

*  Principles,  Book  IV,  chap.  7. 

*  "  Among  the  panaceas  advocated  in  our  time  none  has  been  more  criticised 
than  '  association.'      From  a  practical  point  of  view  these  societies  seem  to 
present  none  of  the  advantages  ordinarily  associated  either  with  complete  in- 
dependence or  with  a  well-managed  business  concern." 


492        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

in  operation,  but  it  is  hardly  probable  that  he  would  have  modified 
his  opinion.  At  any  rate,  the  attitude  of  his  disciples  is  not  much 
more  favourable. 

One  feels  tempted  to  say  that  there  is  nothing  very  new  in  all 
this.  The  remark  would  have  been  particularly  gratifying  to  Le 
Play,  who  considered  that  invention  was  impossible  in  social 
science  and  that  what  he  himself  had  done  was  merely  to  make  a 
discovery. 

The  discovery  of  "  the  essential  constitution  of  humanity,"  as 
he  called  it,  was,  he  thought,  the  outcome  of  his  methods  of  observa- 
tion. His  method  was  really  always  more  important  than  his 
doctrine.  It  has  always  enjoyed  a  considerable  measure  of  success, 
and  it  seems  to-day  as  if  it  would  survive  the  doctrine.  Le  Play 
was  brought  up  as  a  mining  engineer  and  had  travelled  extensively.1 
Twenty  years  of  his  life  had  been  spent  in  this  way,  and  during 
that  period  he  had  travelled  over  almost  the  whole  of  Europe,  even 
as  far  as  the  Urals.  It  was  while  staying  in  the  neighbourhood  of 
those  mountains  that  he  conceived  the  idea  of  writing  monographs 
dealing  with  individual  families  belonging  to  the  working  classes, 
a  method  of  investigation  which  he  is  never  weary  of  contrasting 
with  that  other  "  disdainful  method  of  invention."  2 

To  write  a  family  monograph  3  d  la  Le  Play  is  not  merely  to  relate 
its  history,  to  describe  its  mode  of  life,  and  to  analyse  its  means  of 
subsistence,  but  also  to  sum  up  its  daily  life  in  a  kind  of  double- 
entry  book-keeping  where  every  item  of  expenditure  is  carefully 
compared  and  balanced  with  the  receipts.  But  there  is  much 
that  is  artificial  and  a  great  deal  that  is  childish  in  this  seemingly 
mathematical  precision,  where  not  merely  economic  wants  but  such 
needs  as  those  of  education,  of  recreation,  and  of  intemperance, 
virtues  as  well  as  vices,  are  catalogued  and  reckoned  in  terms  of 
£  s.  d.  Its  advantage  lies  in  its  holding  the  attention  of  the  observer, 

1  "  I  have  frequently  posted  as  much  as  1000  kilometres  in  order  to  con- 
sult some  eminent  landowner  living  on  the  confines  of  Europe."  (Letter  to  M.  de 
Eibbes,  October  3, 1867.) 

1  "  This  method  is  based  upon  a  careful  observation  of  each  fact  and  its  past 
history.  Nothing  is  left  to  the  imagination,  the  presupposition,  or  the  prejudices 
of  the  observer.  It  is  essentially  scientific  and  exact."  (La  Reforme  en  Europe.) 

1  These  monographs  appeared  first  of  all,  as  we  have  seen,  in  his  great  work 
on  the  European  workmen  in  1855.  The  work  has  been  carried  on  by  his  disciples 
and  the  results  incorporated  in  the  Ouvriers  des  Deux  Mondes,  which  already 
numbers  above  a  hundred  volumes.  They  have  also  employed  the  method  in 
writing  monographs  on  industries  and  communes,  etc. 

The  method  requires  supplementing  by  reference  to  statistics  of  population  and 
wages,  which  can  only  be  supplied,  of  course,  by  Governments. 


LE  PLAY'S  SCHOOL  493 

even  when  he  is  a  mere  novice  at  the  work,  by  obliging  him  to  put 
something  in  every  column  and  allowing  nothing  to  escape  his 
notice.1 

But  when  Le  Play  proceeds  to  declare  that  this  method  has 
revealed  the  truth  to  him  and  helped  him  to  formulate  the  doctrines 
of  which  we  have  just  given  a  risumi  it  really  seems  as  if  he  were 
making  a  great  mistake.  Actually  it  has  only  revealed  what  Le  Play 
expected  to  find  ;  in  other  hands  it  might  have  yielded  quite  different 
results.  He  declares  that  it  has  proved  to  him  that  only  those 
families  which  are  grouped  under  paternal  authority  and  which  obey 
the  Ten  Commandments  are  really  happy.'  That  may  be,  but 
how  would  he  define  a  happy  family  ?  "  A  happy  family  is  one  that 
dwells  in  unity  and  abides  in  the  love  of  God."  He  has  thus  armed 
himself  with  a  definite  a  priori  criterion  of  happiness ;  3  but  there 
is  nothing  to  prove  that  the  unstable  disorganised  family  of  the 
Parisian  factory  hand  may  not  be  infinitely  more  happy  than  the 
family  group  of  Melouga  or  the  patriarchal  family  of  the  Bashkirs 
of  Turkestan. 

A  comparison  has  often  been  drawn  between  Le  Play's  school 
and  the  German  Historical  school.  It  is  pointed  out  th'at  both 
schools  lay  great  emphasis  upon  the  method  of  observation  and 
focus  attention  upon  the  institutions  of  the  past,  and  that  to  some 
extent  they  both  represent  a  reaction  against  Liberalism  and  Classical 
optimism.  But  the  resemblance  is  wholly  superficial.  At  bottom 
the  two  schools  are  not  merely  different,  but  even  divergent.  The 
German  school  seeks  the  explanation  of  the  present  in  the  past, 
while  Le  Play's  school  is  merely  out  to  learn  a  few  lessons.  The 
one  studies  the  germ  which  is  to  develop  and  to  bear  fruit,  while 
the  other  admires  the  type  and  the  model  to  which  it  thinks  it 

1  "  The  comparison  of  receipts  and  expenditure  should  help  to  discover  any 
oversight,  just  as  the  weight  of  a  chemical  substance  both  before  and  after  an 
experiment  helps  to  determine  the  nature  of  the  chemical  reaction."  (Bureau, 
UGSuvre  d1  Henri  de.  TourviUe.) 

1  With  a  good  deal  of  candour  he  admits  offering  a  reward  to  anyone  who 
could  ahow  him  a  single  happy  family  except  under  conditions  of  this  kind* 
"  But,"  he  adds,  "  all  my  efforts  proved  fruitless."  (Let  Ouvriert  europient, 
vol.  iv,  introduction.) 

•  When  Le  Play  teaches  us  that  the  essential  condition  of  society  impliea 
A  double  foundation — the  Decalogue  and  paternal  authority, 
A  twofold  link — religion  and  sovereignty,  and 
Three  kinds  of  material — the  community,  private  property,  and  em. 

plovers, 

we  cannot  help  thinking  that  the  so-called  method  of  observation  has  a  very 
pronounced  trait  of  dogmatism  in  its  constitution. 


494        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

necessary  to  conform.  The  one  is  evolutionary,  the  other  traditional, 
and  the  conclusions  of  the  former  are  radical  in  the  extreme,  and 
even  socialistic,  while  those  of  the  latter  are  usually  conservative. 

And  so  Play's  true  position  is  in  the  chapter  dealing  with  Social 
Christianity,  and  not  among  the  writers  of  the  Historical  school. 

His  unshaken  belief  in  the  natural  propensity  of  man  to  evil 
and  error  is  sufficient  to  give  him  his  place.  But  we  must  beware 
of  confusing  his  doctrine  with  that  of  the  Social  Catholics,  for, 
unlike  them,  he  is  rather  prone  to  invoke  the  authority  of  the 
Mosaic  law,  especially  the  Decalogue,  and  to  take  his  illustrations 
from  England,  which  is  a  Protestant  country,  or  from  China  or 
Mohammedan  lands.  His  importance  among  authorities  on  social 
questions  is  not  very  great,  but  his  attitude  towards  Church  and 
clergy  was  on  the  whole  defiant,1  and  the  plan  of  reform  of  which 
we  have  just  given  an  outline  is  very  different  from  that  of  the 
Social  Catholics. 

There  was  a  schism  in  the  school  in  1885.  The  "  Unions  of  Social 
Peace,"  with  their  organ,  La  Ri forme  sociale,  have  on  the  whole 
remained  faithful  to  the  programme  as  outlined  in  this  chapter. 
The  dissenting  branch,  on  the  other  hand,  with  M.  Demolins  and 
the  Abbe  de  Tourville  as  leaders,  has  developed  the  doctrine  on  its 
ultra-individualistic  or  Spencerian  side,  so  that  only  in  origin  can  it 
be  regarded  as  at  all  connected  with  the  school  of  Le  Play. 

The  "  School  of  Social  Science,"  as  it  is  called — at  least,  that  is 
the  name  it  has  given  to  its  review — claims  that  it  is  still  faithful  to 
the  method  of  the  master.  It  even  goes  so  far  as  to  say  that  Le  Play 
was  ignorant  of  the  full  possibilities  of  this  method,  and  condemns 
his  failure  to  establish  a  positive  science  by  means  of  it.  In  reality, 
however,  the  master's  method  has  quite  a  subordinate  rdle  in  the 
activities  of  this  new  school,  for  the  simple  reason  that  it  is  practically 
useless  except  for  the  production  of  monographs.  The  new  school 
arranges  its  facts  according  to  their  natural  relations,  and  attempts 
to  link  the  study  of  social  science  to  the  study  of  geographical 
environment. 2  The  study  of  environment  receives  some  attention 
in  the  works  of  Le  Play  himself,  but  it  has  assumed  much  greater 
importance  since  then.  To  give  but  a  single  instance,  the  new 

1  "  The  principal  object  to  aim  at  here  is  the  limitation  of  the  ecclesiastical 
personnel  with  a  view  to  keeping  them  all  fully  employed,"  as  he  adds  later  on. 
He  had  the  same  antipathy  to  religious  congregations  as  he  had  to  other  forma 
of  association. 

•  "  No  social  phenomenon  can  ever  be  explained  if  it  is  taken  out  of  its  own 
setting.  All  social  science  ia  based  upon  this  law."  (Demolins,  La  Classification 
sociale.) 


SOCIAL  CATHOLICISM  495 

school  attempts  to  show  how  the  configuration  of  the  Norwegian 
fiord,  the  almost  complete  absence  of  arable  land,  and  the  consequent 
recourse  to  fishing  as  a  means  of  livelihood,  even  the  very  dimensions 
of  their  sea-craft,  have  helped  to  fix  the  type  of  family  and  even  the 
political  and  economic  constitutions  prevalent  among  the  Anglo- 
Saxon  race.  In  a  similar  fashion,  the  vast  steppes  of  central  and 
southern  Asia  have  begotten  a  civilisation  of  their  own.  It  is 
the  Historical  materialism  of  the  Marxian  school  reappearing  in 
the  more  picturesque  and  more  suggestive  guise  of  geographical 
determinism.1 

The  new  school,  however,  is  not  very  favourably  inclined  to 
Le  Play's  programme  of  social  reform,  especially  its  teaching  con- 
cerning the  family.  Their  aim  is  not  the  preservation  of  the 
family,  but  the  placing  of  each  child  in  a  position  to  found  a  family 
of  his  own  as  soon  as  possible.  Their  object  is  neither  family 
nor  communal  solidarity,  but  self-help,  not  the  family  group,  but 
the  single  individual  family,  not  the  English,  but  the  American 
home.  Demolins  is  an  ardent  believer  in  the  struggle  for  existence, 
and  no  one  has  ever  professed  greater  contempt  for  the  solidarist 
doctrine.  "  Social  salvation,  like  eternal  life,"  says  he,  "  is 
essentially  a  personal  affair  " — a  singularly  heterodox  declaration, 
by  the  way,  for  if  salvation  is  a  purely  personal  matter  of  what  use 
is  the  Church  ?2 

II :    SOCIAL  CATHOLICISM 

THE  term  "Catholic  Socialism,"  which  is  occasionally  employed  as 
an  alternative  to  the  above  title,  is  objected  to  by  the  majority 
of  Catholics  as  being  excessively  restrictive.  The  generic  term 
"  Christian  Socialism  "  was  first  employed  by  a  Frenchman,  Francis 
Huet,  in  a  book  entitled  Le  Regne  social  du  Christianismc,  published 
in  1853.3 

1  The  similarity  noted  here  has  given  rise  to  emphatic  protests  on  the  part 
of  certain  members  of  this  school.  There  is  no  need  to  take  offence  at  the 
epithet,  however,  provided  we  are  careful  to  distinguish  it  from  philosophic 
materialism  and  recognise  that  it  does  not  necessarily  exclude  idealism. 

1  This  branch  of  the  school,  of  which  Tourville  and  Demolins  were  the  earliest 
leaders,  has  given  us  several  excellent  books.  Demolins'  own  work  on  the 
superiority  of  the  Anglo-Saxons  caused  quite  a  stir.  Then  there  is  M.  de  Rousiers' 
book  on  producers'  industrial  unions,  and  P.  du  Maroussem's.  We  would 
also  specially  mention  Paul  Bureau's  Le  Control  de  Travail  (1902),  La  Participation 
aux  Bknificet,  and  La  Crvse.  morale,  des  Temps  nouveaux.  Bureau's  work  is  charac- 
terised by  precise  impartial  analysis  of  facts  combined  with  great  moral  fervour. 

•  Huet  was  a  professor  at  Ghent,  which  accounts  for  his  being  considered  a 
Belgian,  just  as  Walras  is  generally  considered  a  Swiss. 


496        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

But  at  least  two  other  authors,  namely,  Buchez  in  his  Essai 
(Tun  Traitt  complet  de  Philosophic  au  point  de  vue  du  Catholicism* 
et  du  Progres  (1838-40),  and  the  fugitive  Abbe  de  Lamennais  in  La 
Question  du  Travail  (1848),  can  lay  considerable  claims  to  priority 
in  the  matter.  Buchez  was  the  founder  of  the  Co-operative  Associa- 
tion of  Producers  (1832),  and  Lamennais  outlined  a  scheme  of 
co-operative  banks  almost  exactly  like  those  afterwards  established 
in  Germany  by  Raiffeisen.1 

Present-day  Catholicism,  however,  shows  no  great  desire  to  honour 
any  of  them.  The  one  ambition  of  these  three  republicans  was  to 
effect  a  union  between  the  Church  and  the  Revolution.8  The  most 
advanced  of  the  Social  Catholics  of  to-day,  on  the  other  hand,  would 
be  well  satisfied  could  they  establish  some  kind  of  understanding 
between  the  Church  and  democracy.  Such  at  least  is  the  programme 
recently  laid  down  by  M.  Marc  Sangnier,  the  founder  of  the  Sillon. 

About  the  same  time  we  find  Monseigneur  von  Ketteler,  Bishop 
of  Mayence,  preaching  a  doctrine  which  drew  its  inspiration,  not 
from  "  the  false  dogmas  of  '89,"  but  from  the  institutional  life 
of  the  Middle  Ages,  from  the  guilds  and  the  other  corporative 
associations,  which  are  minutely  described  by  him  and  his  disciples, 
especially  Canon  Moufang  and  the  Abbe  Hitze.  Some  such  insti- 
tutional activity  was  again  to  form  the  corner-stone  of  Social 
Catholicism.3 

1  He  was  the  first  to  emphasise  the  importance  of  borrowers  combining. 
Only  in  this  way  can  the  poor  hope  to  offer  some  real  security.  "  How  is  it  that 
the  worker  cannot  borrow  ?  Simply  because  he  has  no  security  to  offer  except 
just  his  work  in  the  future.  That  future  guarantee  can  only  become  real  and 
certain  by  means  of  combination.  Union  eliminates  the  uncertainty  which 
hitherto  made  the  security  worthless  and  the  loan  impossible."  (La  Question  du 
Travail,  p.  25.) 

"  The  problem  is  to  outline  a  state  of  society  where  working  men  will  work 
only  for  themselves  and  not  for  others  ;  where  none  will  reap  but  has  already 
sown,  and  where  each  will  enjoy  the  fruits  of  his  own  labour."  (Ibid.) 

1  "  Christianity  and  revolution  as  far  as  humanity  is  concerned  have  identical 
aims,  and  the  one  is  the  natural  outcome  of  the  other."  (Buchez,  Traite  de  la 
Politique,  vol.  ii,  p.  504.) 

*  Moufang's  principal  writings  were  published  in  1864  under  the  title  of  Le 
Question  ouvriere  et  le  Christianisme.  He  could  never  make  up  his  mind  as  be- 
tween the  corporative  and  the  co-operative  ideal,  however.  The  latter  was  very 
much  to  the  front  just  then,  not  only  in  France,  but  also  with  the  English 
Christian  Socialists  and  with  the  German  socialist  Lassalle.  This  was  before  the 
co-operative  movement  was  eclipsed  by  trade  unionism. 

Hitze,  however,  shows  none  of  his  master's  hesitation,  but  emphatically 
declares  that  "  the  solution  of  the  social  question  is  essentially  and  exclusively 
bound  up  with  a  reorganisation  of  trades  and  professions.  We  must  have  the 
mediaeval  regime  of  corporations  re-established — a  regime  which  offers  a  better 


SOCIAL  CATHOLICISM  497 

During  the  period  of  the  Second  Empire  most  of  the  Social 
Catholics  seem  to  have  fallen  asleep,  but  they  were  aroused  from 
their  slumbers  by  the  disaster  of  1870.  The  Comte  Albert  de  Mun 
proved  the  inspirer  this  time,  and  his  noble  eloquence,  which  led 
to  the  formation  of  unions  of  Catholic  working  men,  was  instru- 
mental in  giving  the  movement  a  vigorous  start.  The  same  period 
witnessed  the  appearance  of  L1 Association  catholique,  a  review  which 
took  as  its  programme  the  study  of  economic  facts  in  a  Catholic 
spirit — an  object  that  has  always  been  kept  steadily  in  view. 

Organisation  in  the  form  of  corporations  was  given  first  place  in 
the  Social  Catholic  programme.1  Le  Play's  corner-stone — the  family 
organisation — was  not  rejected,  but  they  considered  that  though 
the  family  was  to  remain  the  basis  for  moral  reform  a  wider  associa- 
tion of  an  economic  character  must  serve  as  a  basis  for  economic 
reform. 

At  first  sight  this  may  seem  somewhat  surprising.  The  con- 
nection between  these  professional  associations  and  the  teaching  of 
the  Gospel  is  not  very  evident,  nor  is  it  very  clear  how  such  organisa- 
tions could  ever  hope  to  Christianise  society.  But  although  the 
Gospels  know  nothing  of  a  corporative  or  any  other  rigime  we  must 
not  forget  their  prominence  during  the  Middle  Ages — when  the 
authority  of  the  Church  was  in  the  ascendant.  As  long  as  this 
regime  lasted  what  we  understand  as  the  social  question — the  vexed 
problem  as  to  whether  we  possess  sufficient  moral  strength  to 
keep  the  peace  between  capital  and  labour — never  presented  itself. 
The  problem  is,  of  course,  somewhat  different  to-day,  but  its  solution 
may  possibly  require  the  exercise  of  similar  virtues,  namely,  obedience 
to  a  detailed  system  of  organisation  coupled  with  a  feeling  of  brother- 
hood— the  chastening  of  the  whole  complexity  of  social  relations  by 
the  spirit  of  Christianity. 

solution  of  the  social  problem  than  any  which  existed  either  before  or  after.  Of 
course  times  have  changed,  and  certain  features  of  the  mediaeval  rigime  would 
need  modification.  But  some  such  corporative  rtgime,  conceived  in  a  more 
democratic  spirit  must  form  the  economic  basis."  (Capital  and  Labour.) 

i  "  We  must  direct  all  our  private  initiative  and  concentrate  public  attention 
upon  this  one  reform — the  corporative  reorganisation  of  society."  (Programme 
de  VCEnvre  des  Cerdes  ouvriera,  April  1894.) 

Co-operative  association  is  dismissed  altogether.  The  Social  Catholics 
have  especially  little  sympathy  with  the  small  retail  co-operative  stores,  because 
they  threaten  the  existence  of  the  small  merchant  and  the  small  artisan — 
types  of  individuals  that  are  dear  to  the  heart  of  the  Catholics.  On  the  other 
hand,  it  shows  iteelf  very  favourably  inclined  towards  co-operative  credit,  because 
of  the  possibility  of  assisting  the  classes  already  referred  to — the  shopkeeper  and 
the  small  merchant. 


498        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

Some  of  their  opponents  have  not  hesitated  to  charge  these 
Catholics  with  a  desire  to  return  to  the  feudalism  of  the  Middle  Ages, 
which  is  of  course  utterly  false.  What  the  Social  Catholics  wished 
to  do  was  to  build  up  the  new  social  structure  upon  the  basis  of 
the  modern  trade  union,  or  upon  syndicalism ;  and  the  proof 
that  the  foundation  is  not  at  any  rate  too  narrow  lies  in  the 
fact  that  the  new  schools  of  socialists  can  conceive  of  none  better. 
With  this  as  the  foundation  they  looked  forward  not  merely  to 
the  development  of  a  new  society,  but  also  to  the  rise  of  a 
new  ethic.  The  fact  that  they  forestalled  the  socialists  in  this 
respect  shows  that  the  Social  Catholics  were  at  least  not  hopelessly 
antiquated. 

Early  in  the  history  of  the  movement  they  tried  to  organise  a 
kind  of  mixed  syndicat  consisting  both  of  masters  and  men,  because 
this  seemed  to  them  to  offer  the  best  guarantee  for  social  peace. 
But  the  results  proved  disappointing,  and  they  were  soon  forced  to 
relinquish  that  idea  and  to  content  themselves  with  a  separate 
organisation  of  masters  and  men  co-operating  only  in  matters 
relating  to  the  regulation  of  work  or  the  settling  of  differences.1 
Such  collateral  unions,  it  was  at  first  thought,  would  gradually 
become  the  organs  of  labour  legislation,  and  the  State  would  entrust 
them  with  the  discharge  of  that  function  because  of  their  greater 
freedom  in  the  making  of  experiments.  All  questions  affecting 
the  interests  of  a  trade,  the  hours  of  labour,  Sunday  observance, 
apprenticeship,  the  sanitary  condition  of  the  workshops,  the  labour 
of  women  and  children,  and  even  the  rate  of  wages  paid,  instead 
of  being  regulated  as  they  are  at  present  by  brutal,  inflexible  laws 
which  are  seldom  suited  to  meet  every  individual  case,  would 
henceforth  be  settled  by  the  union,  and  the  rules  of  the  union  would 
be  incumbent  upon  all  the  members  of  the  trade  or  profession, 
both  masters  and  men.  Everyone  would  be  free  to  enter  the  union 
or  to  decline  membership  just  as  he  chose,  but  no  member  would  be 
allowed  to  violate  the  rules  of  the  union  or  to  lower  the  conditions 

1  In  1894  the  Congress  of  Catholic  Circles  which  met  at  Rheims  declared  that, 
"  without  minimising  the  difficulties  which  stand  in  the  way  of  extending  the 
mixed  syndicats,  the  formation  of  such  syndicate  must  be  our  chief  aim."  In  1904 
Father  Rutten,  one  of  the  leaders  of  the  Belgian  Catholic  Syndical  movement,  in 
a  report  on  the  syndicalist  movement  writes  as  follows :  "  We  do  not  despair 
of  the  mixed  syndicat,  which  in  theory  we  certainly  think  is  nearest  perfection. 
But  we  must  not  blind  ourselves  to  facts,  and  whether  we  will  or  no  we  have  to 
admit  that  at  the  present  moment  the  mixed  syndicat  in  ninety  industries  out  of 
every  hundred  seems  quite  Utopian."  (Quoted  by  Dechesne,  Syndicats  Ouvriert 
Ixlges,  p.  76 1 ;  1906.) 


SOCIAL  CATHOLICISM  499 

of  labour  in  any  way.  "Free  association  within  an  organised 
profession,"  such  is  the  formula.1 

To  those  Liberals  who  feign  indignation  at  seeing  purely  private 
institutions  thus  invested  with  legislative  authority  it  may  be 
answered  that  the  "  labour  union  "  so  constituted  forms  an  associa- 
tion which  is  as  natural  and  as  necessary — understanding  by  this 
that  it  is  independent  of  the  voluntary  conventions  of  the  parties 
interested — as  one  based  upon  community  of  residence.  Everybody 
admits  that  the  inhabitants  of  the  commune  ought  to  submit  to 
the  rule  of  the  organised  majority.  What  difference  would  it  make 
if  the  majority  thus  organised  constituted  a  corporation  rather 
than  a  commune  ?  2 

Some  go  so  far  as  to  regard  these  professional  associations 
as  possessed  of  an  important  political  role,  and  would  even  go  the 
length  of  making  this  new  corporative  unit  the  basis  of  a  newfranchise 
for  the  election  of  at  least  one  of  the  two  Chambers. 

It  is  not  very  easy,  perhaps,  to  get  a  clear  idea  of  what  a  society 
built  upon  a  plan  of  this  kind  would  really  be  like,  but  the  difficulty 
is  no  greater  in  this  case  than  in  some  others. 

In  the  first  place  it  would  have  to  be  a  society  professing  the 
Catholic  faith.3  Should  the  enemies  of  religion  or  even  the  in- 

1  Such  is  the  programme  as  outlined  especially  in  Austria,  which  is  one  of  the 
countries  where  Social  Catholicism  seems  fairly  powerful.  As  a  matter  of  fact, 
the  corporative  rlgime  has  never  quite  disappeared  there,  and  for  some  years  now 
attempts  have  been  made  to  revive  it  in  the  smaller  crafts.  The  new  corporation 
would  take  the  form  of  a  centralised  organisation,  whose  regulations  would  be 
obligatory  upon  all  the  members  of  the  craft. 

1  "  The  commune  has  always  been  organised.  Is  there  any  reason  why  the 
trade  should  not  be  T  In  both  cases  special  relations  are  established,  special 
needs  arise,  there  are  frequent  conflicts  and  occasional  harmony  between  the 
different  interests.  But  all  of  them  are  nevertheless  intimately  bound  together, 
and  the  links  connecting  them  must  be  co-ordinated  on  some  regular  plan  if  every 
one  is  to  be  safe,  and  free  to  follow  his  own  bent."  (Henri  Lorin,  Principe*  de 
V Organisation  profe&sionnette,  in  L' Association  catholique,  July  16,  1892.) 

To  this  it  might  be  replied  that  the  majority  generally  makes  the  law  for  the 
commune,  but  that  in  the  case  of  a  free  corporation  it  is  often  the  minority  that 
rules.  To  which  it  might  be  retorted  that  the  so-called  majority  is  often  not 
better  than  a  minority  of  the  electors,  and  a  very  small  minority  indeed  of  the 
whole  inhabitants — who  of  course  include  women,  who  generally  have  no  votes. 
Moreover,  as  soon  as  the  rules  of  the  syndicat  became  really  obligatory  the 
majority  if  not  the  whole  of  the  workers  in  the  trade  would  be  found  within  the 
union. 

•  Father  Antoine  writes  as  follows  in  his  Court  d' Economic  sociale,  p.  154 :  "  The 
social  question  can  never  be  completely  solved  until  we  have  a  complete  revival  of 
Christian  morals."  Still  more  categorical  is  the  declaration  of  M.  LeonHarmel 
in  V Association  catholique  for  December  1889  :  "  We  can  see  only  one  remedy, 


500        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

different  by  any  chance  ever  gain  the  upper  hand  in  the  social  unit 
the  whole  structure  would  immediately  fall  to  the  ground.  Its 
realisation,  accordingly,  is  quite  hypothetical. 

It  would  also  be  a  society  founded  upon  brotherhood  in  the  full 
sense  of  the  term.  The  only  real  brotherhood  is  that  founded 
upon  the  fatherhood  of  God,  and  not  upon  any  socialistic  conception 
of  equality.  But  even  brotherhood  and  a  common  parentage  may 
not  be  sufficient  to  prevent  irregularities,  and  the  family  relation 
in  addition  to  this  almost  inevitably  implies  the  rights  of  the 
youngest  and  the  duties  of  the  oldest.  Within  the  corporative  unit 
already  outlined  true  equality  would  always  reign,  for  the  humblest, 
meanest  task  would  be  of  equal  dignty  with  the  most  exalted 
office  in  the  State,  and  everyone  would  be  content  and  even  proud 
to  live  where  God  had  placed  him.1 

Such  a  society  would  be  a  pure  hierarchy.  All  the  authority 
and  responsibility,  all  the  duties  involved,  would  be  on  the  master's 
side.  On  the  worker's  side  would  be  rights  respected,  life  assured 
on  the  minimum  level,  and  a  re-establishment  of  family  life. 2 

Social  Catholicism  further  undertook  to  disprove  the  first  article 
in  the  socialist  creed,  namely,  that  "  the  emancipation  of  the  workers 
can  only  be  accomplished  by  the  workers  themselves."  It  main- 
tained that,  on  the  contrary,  this  object  could  only  be  accomplished 
by  the  help  of  the  masters  and  of  all  the  other  classes  in  society, 
not  excluding  even  the  non-professional  classes,  landed  proprietors, 
rent-receivers,  and  consumers  generally,3  all  of  whom  ought  to  be 

and  that  is  that  the  authority  of  the  Pope  should  be  recognised  all  the  world 
over,  and  his  ruling  accepted  by  all  people." 

The  annual  study  reunions  which  go  by  the  name  of  Its  Semainza  societies, 
and  which  afford  one  of  the  best  manifestations  of  the  kind  of  activities  which 
Social  Christianity  gives  rise  to  everywhere,  are  not  so  exclusive.  Economic 
questions  of  all  kinds  are  discussed,  but  the  programme  is  not  strictly  Catholic 
at  all,  and  the  basis  is  wide  enough  to  include  everyone  who  is  a  professed 
Christian. 

1  "  The  corporations  which  would  be  set  up  under  the  aegis  of  religion  would 
aim  at  making  all  their  members  contented  with  their  lot,  patient  in  toil  and 
disposed  to  lead  a  tranquil,  happy  life  "  (sua  sorte  contentos,  operumque  patientes 
«/  ad  quietam  ac  tranquillam  vitam  agendam  inducant).  (Encyclical  of  Leo  XII, 
December  28,  1878,  called  the  Quod  Apostolici.  See  History  of  Corporations,  by 
M.  Martin  Saint-Leon.) 

1  "The  corporation  is  simply  the  model  of  the  Church.  Just  as  for  the 
Church  all  the  faithful  are  equal  in  the  sight  of  God,  so  here.  But  equality  ends 
there.  For  the  rest  it  is  a  hierarchy."  (Segur-Lamoignon,  L'  Association  oailwlique., 
July  13, 1894.) 

*  The  Ligue  sociale  d'Acheteurs,  founded  in  Paris  in  1900,  is  of  Social  Catholic 
inspiration. 


SOCIAL  CATHOLICISM  501 

informed  of  the  responsibilities  which  their  different  positions 
impose  upon  them  and  of  the  special  duty  which  is  incumbent  upon 
all  men  of  making  the  most  of  the  talents  with  which  the  Master 
has  entrusted  them. 

The  German  Christliche  Gewerkvereine,  which  gets  most  of  its 
recruits  among  the  Catholics,  is  already  taking  an  important  part 
in  German  political  life  and  is  doing  something  to  counterbalance 
the  "  Reds,"  or  the  revolutionary  socialists.  They  advocate  the  union 
of  masters  and  men,  but  are  extremely  anxious  not  to  be  confused 
with  the  **  Yellows,"  or  those  who  advocate  mixed  unions.  In  other 
words,  they  are  independent  both  of  the  masters  and  the  socialists. 

State  intervention  might  be  necessary  at  first  in  order  to  estab- 
lish the  corporative  regime,  but  once  founded  it  would  naturally 
monopolise  all  the  legislative  and  police  power  which  affects  labour 
in  any  way,  especially  in  the  matter  of  fixing  wages,1  arranging 
pensions,  etc.  The  legislature  would  still  find  ample  material  to 
exercise  its  powers  upon  outside  these  merely  professional  interests, 
especially  in  regulating  the  rights  of  property,  prohibiting  usury, 
protecting  agriculture,  etc.2 

"  The  State,"  says  the  Immortale  Dei,  an  Encyclical  of  Pope 
Leo  XIII — repeating  a  text  of  St.  Paul — "  is  the  minister  of  God 
for  good."  Elsewhere  St.  Paul  declares  that  the  Law  is  the 
schoolmaster  to  bring  us  unto  Christ,  and  if  we  paraphrase  this  to 
mean  that  the  function  of  law  is  to  lead  men  to  a  higher  conception 
of  brotherhood  we  have  a  fairly  exact  idea  of  what  Social  Catholicism 
considered  to  be  the  function  of  the  State.  Occasionally  the  party 
has  betrayed  signs  of  more  advanced  tendencies  which  would  bring 
it  more  into  line  with  modern  socialism.  But  for  the  most  part 
such  indications  have  been  of  the  nature  of  individual  utterances, 
which  have  generally  resulted  in  the  formal  disapproval  of  Rome 
and  the  submission  of  the  rebel. 

1  "  More  important  »ven  than  free  will,  whether  of  masters  or  of  men,  is  that 
higher  and  more  ancient  law  of  natural  justice  which  demands  that  wages  should 
always  be  sufficient  to  enable  the  worker  to  lead  a  sober  and  honest  life.  But 
lest  the  public  authority  in  this  case,  as  in  some  other  analogous  cases,  such  aa 
the  question  of  the  length  of  the  working  day,  should  unwisely  intervene,  and  in 
view  of  the  great  variety  of  circumstances,  it  is  better  that  the  solution  should 
be  left  in  the  hands  of  the  corporations  or  the  unions."  (Encyclical,  Rerum 
Novarum,  1891.) 

1  The  Social  Catholics  wherever  found  are  usually  Protectionists,  the  reason 
being  that  they  think  their  "  corporative  regime,  could  never  be  kept  going  without 
some  protection  against  foreign  competition,"  and  also  because  moat  of  their 
adherents  are  drawn  from  the  ranks  of  the  agricultural  unions.  (Programme  dt 
VQSuvre  de»  Cerclet  ouvrieri,  Art.  7.) 


502        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

It  was  M.  Loesewitz  in  1888  who  made  the  first  violent  attack 
upon  the  so-called  productivity  theory  of  capital  in  L' Association 
catholique.1  It  caused  quite  a  sensation  at  the  time,  and  provoked 
a  disapproving  reply  from  the  Comte  de  Mun.  Afterwards,  however, 
the  article  became  the  programme  of  a  party  known  as  "  Les  jeunea 
Abbes."  Nor  must  we  omit  to  mention  the  growth  of  the  Sillon, 
founded  in  1890,  the  political  ambition  of  whose  members  is  the 
reconciliation  of  the  Church  and  democracy  and  even  republicanism, 
and  whose  economic  aim  is  the  abolition  of  the  wage-earner  and  his 
master.2  This  is  also  the  aim  of  the  syndicalists,  and  Article  2  of 
the  Confederation  generate  du  Travail  (C.G.T.)  declares  that  one  of 
the  avowed  objects  of  the  federation  is  the  disappearance  of  the 
wage-earner  and  the  removal  of  his  master.  Instead  of  seeking  a 
solution  of  the  problem  in  the  parallel  action  of  syndicate  of  men 
on  the  one  hand  and  of  masters  on  the  other,  it  would  suppress  the 
latter  altogether,  leaving  the  men  the  right  of  possessing  their  own 
instruments  of  production  and  of  keeping  intact  the  produce  of  their 
labour.  It  is  true  that  the  Sillon  is  under  the  ban  of  the  Pope,  but 
this  essentially  syndicalist  movement  is  still  in  existence. 

If  the  Catholic  school  has  experienced  some  difficulty  in  throwing 
out  a  left  wing  it  has  never  been  without  a  right  wing  which  has 
always  shown  a  predilection  for  the  masters.  "  The  problem  is  not 
how  to  save  the  worker  through  his  own  efforts,  but  how  to  save 
him  with  the  master's  co-operation  " — the  benevolent  master  of 
Le  Play's  school  over  again.3  The  right  wing,  moreover,  thinks  that 

1  "The  so-called  productivity  of  capital,  which  constitutes  the  greatest 
iniquity  of  profit-making  society,  and  which  is  from  an  economical  point  of  view 
the  final  cause  of  social  suffering,  is  nothing  better  than  a  word  invented  to  hide 
the  real  fact,  namely,  the  appropriation  of  the  fruits  of  labour  by  those  who 
possess  the  instruments  of  labour."  (Loesewitz,  Legitlation  du  Travail,  in 
L' Association  catholique,  1886.) 

1  Extract  from  a  report  of  a  meeting  of  the  Sillon,  November  1907  : 

"  MABO  SANGNMB.  The  social  transformation  which  we  desire  to  see,  com- 
rades, will  aim,  not  at  absorbing  the  individual,  but  rather  at  developing  him. 
We  want  the  factories,  the  mines,  and  the  industries  in  the  possession,  not  of 
the  State,  but  of  groups  of  workers. 

"  AN  INTEEBUPTEB.  That  is  socialism. 

"  MABO  SANGNIEB.  You  can  call  it  socialism  if  you  like.  It  makes  no 
difference  to  me.  But  it  is  not  the  socialism  of  the  socialists,  of  the  centralising 
socialists.  We  don't  want  to  set  the  proletarians  free  from  the  control  of  the 
masters  to  put  them  under  the  immediate  control  of  one  great  master,  the 
State  ;  we  want  the  proletarians  themselves,  acting  collectively,  to  become  their 
own  masters." 

*  Milcent,  in  L' Association  catholique,  1897,  vol.  ii,  p.  58.  There  is  a  Catholic 
Social  school  which  is  Liberal  and  individualist  in  its  tendencies,  and  which  is 


SOCIAL  PROTESTANTISM  503 

the  existing  institutions  would  prove  quite  equal  to  a  solution  of  the 
so-called  social  question  if  they  were  once  thoroughly  permeated 
with  the  Christian  spirit  or  if  the  leaders  really  knew  how  to  deal 
with  the  people. 

Ill:  SOCIAL  PROTESTANTISM 

BELIEF  in  the  essentially  individualistic  nature  of  Protestantism 
is  fairly  widespread.1  For  confirmation  there  is  the  emphasis  it  has 
always  laid  upon  the  personal  nature  of  salvation  and  its  denial  of 
the  necessity  for  any  mediator  between  God  and  man,  save  only 
the  Man  Christ  Jesus,  whereas  Roman  Catholicism  teaches  that  only 
through  the  Church — that  great  community  of  the  faithful — is  salva- 
tion ever  possible.  Protestantism  is  the  religion  of  self-help,  and 
naturally  enough  its  social  teaching  is  somewhat  coloured  by  its 
theological  preconceptions.  Nor  must  we  lose  sight  of  its  con- 
nection with  middle-class  Liberalism ;  and  thus  while  in  politics  it 
is  generally  regarded  as  belonging  to  the  left,  in  matters  economic  it 
is  generally  on  the  extreme  right.* 

Whatever  truth  there  may  be  in  this  attempt  to  sum  up  its 
doctrine  and  history,  we  shall  find  as  a  matter  of  actual  fact  that  on 
economic  grounds  it  is  much  more  advanced  than  the  Social  Catholic 
school ;  and  its  extreme  left,  far  from  being  content  with  the  extinc- 
tion of  the  proletariat,  also  demands  the  abolition  of  private  property 
and  the  establishment  of  complete  communal  life. 

Social  Protestantism,  or  Christian  Socialism  as  it  is  known  in 
England,  has  a  birthday  which  may  be  determined  with  some  degree 
of  accuracy.  It  was  in  the  year  1850  that  there  was  founded  in 
England  a  society  for  promoting  working  men's  associations,  having 
for  its  organ  a  paper  entitled  The  Christian  Socialist.*  Its  best 

represented  by  such  writers  aa  the  late  Charles  Perin,  professor  at  Louvain, 
author  of  La  Richesse  and  La  Socialisme  chritien,  and  by  M.  Bambaud,  author 
of  Court  d'Histoire  des  Doctrines.  Nor  ought  we  to  forget  their  connection 
with  the  development  of  agricultural  credit  banks  of  the  Raiffeisen  type  which 
have  been  established  in  Germany,  France,  and  Italy — although  their  inception 
in  Italy  is  largely  the  work  of  a  Jew  named  Wollemborg. 

1  Such,  for  example,  is  the  opinion  of  Nitti  in  his  book  on  Catholic  Socialism, 
and  because  of  that  rather  unsatisfactory  reason  he  only  devotes  a  few  pages  to  it. 

1  There  are  several  historical  considerations  that  may  with  advantage  be 
kept  in  mind  in  dealing  with  this  subject,  such  as,  for  example,  the  notable  fact 
that  while  the  Catholic  Church  has  always  been  opposed  to  usury,  it  was  Calvin 
and  Calvinists  like  Saumaise  and  the  ancient  jurist  Dumoulin  who  first  justified 
the  practice  of  taking  interest. 

•  The  Christian  Socialist  was  preceded  by  another  paper  called  Polities  for 
the  People,  founded  in  1848,  which  may  be  taken  as  the  birthday  of  the  move- 


504         DOCTRINES  INSPIRED  BY  CHRISTIANITY 

known  representatives  were  Kingsley  and  Maurice,  who  subsequently 
became  respectively  professors  of  history  and  philosophy  at  Cam- 
bridge. A  small  number  of  lawyers  also  joined  the  society,  among 
whom  Ludlow,  Hughes,  and  Vansittart  Neale  are  the  most  familiar 
names.  Kingsley  was  much  in  the  public  eye  just  then,  not  only 
because  of  his  impassioned  eloquence,  but  also  on  account  of  the 
success  of  his  novel  Alton  Locke,  which  is  perhaps  the  earliest  piece  of 
socialistic  fiction  that  we  possess.  It  is  the  story  of  a  journeyman 
tailor  and  his  sufferings  under  the  sweating  system — the  horrors 
of  which  were  thus  revealed  to  the  public  for  the  first  time.1 

The  object  which  the  Christian  Socialists  2  had  in  view,  as  we 
have  already  seen,  was  the  establishment  of  working  men's  associa- 
tions. What  type  they  should  adopt  as  their  model  was  not  very 
easily  determined.  The  trade  unions,  little  known  as  yet,  were  just 
then  struggling  through  the  convulsions  of  their  early  infancy. 
Moreover,  they  were  exclusively  concerned  with  professional  matters, 
with  the  struggle  for  employment  and  the  question  of  wages,  and 
altogether  did  not  seem  very  well  fitted  to  develop  the  spirit  of 
sacrifice  and  love  which  was  indispensable  for  the  realisation  of 
their  ideal.  Neither  did  the  co-operative  associations  of  consumers 
seem  very  attractive.  True  they  had  attained  to  some  degree  of 
success  at  Rochdale,  but  they  were  inspired  by  the  teaching  of 
Owen,  which  was  definitely  anti-Christian.  The  fact  also  that  they 
merely  proposed  to  make  life  somewhat  less  costly  and  a  little  more 
comfortable  implied  a  certain  measure  of  stoicism  which  hardly 

ment.  In  any  case  the  date  is  significant  in  view  of  the  contemporary  revolution 
in  France. 

It  is  only  just  to  note  that  Charming,  the  American  pastor,  who  died  in  1842, 
was  one  of  the  pioneers.  His  writings  on  social  questions  are  still  read. 

Those  who  wish  for  more  information  either  on  the  history  or  on  the  other 
aspects  of  Social  Christianity  should  consult  the  New  Encyclopaedia  of  Social 
Reform,  published  in  America. 

1  The  following  year  Charles  Kingsley  preached  a  sermon  in  London  which 
caused  such  a  sensation  that  the  vicar  of  the  parish  felt  bound  to  protest  against 
its  tone  even  during  the  service.  In  the  course  of  the  sermon  Kingsley  remarked 
that  any  social  system  which  enabled  capital  to  become  the  possession  of  a 
few,  which  robbed  the  masses  of  the  land  which  they  and  their  ancestors  had 
cultivated  from  time  immemorial,  and  reduced  them  to  the  condition  of  serfs 
working  for  daily  wage  or  for  charity,  was  contrary  to  the  spirit  of  the  Kingdom 
of  God,  as  revealed  in  Christ.  The  sermon  was  afterwards  published  under 
the  title  of  The  Church's  Message  to  the  Workers. 

1  Maurice  declared  that  everyone  who  is  a  Christian  must  also  be  a  socialist. 
But  the  significance  of  the  word  "  socialist  "  has  changed  somewhat  since  then. 
According  to  Maurice,  "  The  motto  of  the  socialist  is  co-operation ;  of  the 
»n ti -socialist,  competition." 


SOCIAL  PROTESTANTISM  505 

fitted  them  to  be  the  chosen  vessels  of  the  new  dispensation.  And 
so  the  Christian  Socialists  naturally  turned  their  attention  to  pro- 
ducers' associations,  just  as  the  earliest  Social  Catholics  had  done 
before  them.  But  it  would  be  a  mistake  to  imagine  that,  they  owed 
anything  to  Buchez,  whom  they  appear  to  have  ignored  altogether. 
The  reawakened  interest  in  the  possibilities  of  association  which 
exercised  such  a  fascination  over  John  Stuart  Mill  in  1848  had 
touched  their  imagination,  and  Ludlow,  one  of  their  number,  had 
the  good  fortune  to  be  resident  in  Paris,  and  so  witnessed  this  glorious 
revival.  Such  associations  seemed  to  be  just  the  economic  instru- 
ments needed  if  a  transformation  was  ever  to  be  effected,  and  the 
very  process  of  establishing  them,  it  was  hoped,  would  supply 
a  useful  means  of  discipline  in  the  subordination  of  individual  to 
collective  interests.  But  the  process  of  disillusion  proved  as  rapid 
as  it  was  complete.  Contrary  to  what  was  the  case  in  France,  it 
cannot  be  said  that  they  were  ever  really  attempted  in  England. 

But  the  work  of  the  "Association  "  had  not  been  altogether  in 
vain.  Defeated  in  its  attempts  to  arouse  the  worker  from  his  lethargy, 
and  thwarted  in  its  efforts  by  legal  restrictions  of  various  kinds,  it 
began  a  campaign  in  favour  of  a  more  liberal  legislation  in  matters 
affecting  the  welfare  of  the  working  classes.  The  result  was  the 
passing  of  the  Industrial  and  Provident  Societies  Acts  of  1852-62, 
which  conferred  legal  personality  for  the  first  time  upon  co-operative 
associations,  with  consequent  benefit  to  themselves  and  to  other 
working  men's  associations. 

The  Christian  Socialists  thought  that  the  methods  by  which  their 
ideals  might  be  attained  were  of  quite  secondary  importance.  Ex- 
perience had  taught  them  that  voluntary  association  or  legislation 
even  by  itself  could  never  be  of  much  avail  until  the  whole  mental 
calibre  of  the  worker  was  changed.1  What  they  strove  for  above 
all  else  was  moral  reform,  and  whenever  they  use  the  word  '*  co- 
operation "  they  conceive  of  it  not  merely  as  a  particular  system 
of  industry,  but  rather  as  the  antithesis  of  the  competitive  regime 
or  as  the  negation  of  the  struggle  for  existence.  Their  thoughts  are 
admirably  summed  up  in  a  letter  of  Ludlow's  to  Maurice  written 

1  "  There  is  no  doubt  about  association  being  the  form  which  industrial 
government  will  take  in  future,  and  I  have  no  doubt  as  to  it*  success,  but  a  pre- 
liminary training  extending  possibly  over  a  couple  of  generations  is  necessary 
before  the  worker  has  the  requisite  ability  or  moral  strength  to  make  use  of  it." 
(Kingsleyinl856.) 

And  this  is  how  State  intervention  appealed  to  him  :  "  The  devil  is  alwayi 
ready  to  urge  us  to  change  law  and  government,  heaven  and  earth  even,  bat 
takes  good  care  never  to  suggest  that  we  might  change  ourselves." 

B.D.  * 


506        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

from  Paris  in  March  1848,  in  which  he  speaks  of  the  necessity  for 
"  Christianising  socialism." 

Christian  Socialism  in  England,  though  it  has  survived  its 
founders,  has  been  obliged  to  change  its  programme.  It  has 
abandoned  the  idea  of  a  producers'  association,  but  still  advocates 
other  forms  of  co-operation.  Just  now  its  chief  demand  is  for  a 
reorganisation  of  private  property,  which  is  a  particularly  serious 
question  in  England,  where  the  land  is  in  the  hands  of  a  comparatively 
few  people.  In  the  words  of  the  Psalmist,  the  Christian  Socialists 
often  cry  out,  "  The  earth  is  the  Lord's,"  and  they  are  never  weary  of 
pointing  out  how  under  the  Mosaic  law  the  land  was  redistributed 
every  forty-nine  years  with  a  view  to  bringing  it  back  to  its  original 
owners.  And  so  it  finds  itself  supporting  the  doctrines  of  Henry 
George,  who  may  himself  be  classed  as  one  of  the  Christian  Socialists.1 
There  is  also  the  Institutional  Church,  with  its  network  of  organisa- 
tions for  the  satisfaction  of  the  material,  intellectual,  and  moral  needs 
of  the  worker,  which  is  becoming  a  prominent  feature  of  modern 
English  Church  life.  Moreover,  several  of  the  Labour  leaders — Keir 
Hardie,  for  example — are  earnest  Christians.  The  Federation  of 
Brotherhoods,  which  to-day  includes  over  2000  societies,  with  a 
membership  of  over  a  million  working  men,  combines  an  ardent 
evangelical  faith  with  a  strong  advocacy  of  socialism.2 

In  the  United  States  of  America  Christian  Socialism  is  still  more 
aggressive  and  outspoken  in  its  attacks  upon  capitalism.  The 
earliest  society  of  Christian  Socialists  was  founded  at  Boston  in 
1889.  Since  then  these  associations  have  multiplied  rapidly.  The 
latest  of  them  defines  its  objects  in  the  following  terms  :  "  To  help 
the  message  of  Jesus  to  permeate  the  Christian  Churches  and  to 
show  that  socialism  is  necessarily  the  economic  expression  of  the 
Christian  life."  A  little  farther  on  it  declares  itself  persuaded 
"  that  the  ideal  of  socialism  is  identical  with  that  of  the  Church, 
and  that  the  gospel  of  the  co-operative  commonwealth  is  the  Gospel 
of  the  Kingdom  of  God  translated  into  economic  terms."  3 

1  The  official  organ  of  the  Christian  Social  Union,  which  is  definitely  con- 
nected with  the  Church  of  England,  is  the  Economic  Review,  published  at  Oxford 
— not  to  be  confused  with  the  Economic  Journal,  which  is  published  in  London 
by  the  Royal  Economic  Society. 

*  E.  Gounelle,  Le  Mouvement  des  Fraternites. 

9  Mr.  Josiah  Strong,  director  of  the  Institute  of  Social  Service  at  New  York. 
is  the  publisher  of  a  review  called  The  Gospel  of  the  Kingdom,  which  has  for  its 
programme  "  the  study  of  economic  facts  in  the  light  of  the  Gospel,"  and  in 
which  he  maintains  that  "  if  the  world  is  ever  to  be  Christianised  industry  must 
\)2  Christianised  first  of  all,  On  the  question  of  unemployment,  for  example,  he 


SOCIAL  PROTESTANTISM  507 

For  the  other  extreme — the  extreme  right — we  must  look  to 
Germany.  In  1878  Pastors  Stocker  and  Todt  founded  the  Christian 
Social  Working  Men's  Party,  which,  despite  its  title,  drew  most  of 
its  recruits  from  the  middle  classet.  Later  on  Stocker  became 
Court  preacher,  and  during  his  occupation  of  that  post  this  kind  of 
socialism  found  such  favour  in  official  quarters  that  he  was  able  to 
say  that  it  was  his  personal  conviction  that  a  social  revolution 
was  within  the  bounds  of  practical  politics.1  But  in  1890  the 
Emperor  William  II  dismissed  his  pastor,  and  Christian  Socialism 
immediately  lost  its  official  status.* 

At  the  Congress  of  Erfurt  in  1896  two  young  pastors  of  Frankfort 
named  Naumann  and  Goehre  3  tried  to  win  the  adherence  of  the 
working  classes  by  endeavouring  to  give  the  Protestant  churches  a 
more  distinctively  socialist  bias.  But  the  suggestion  was  condemned 
by  the  official  Lutheran  Church,  the  masters  opposed  it,  and  it 
received  but  very  slight  support  from  the  Social  Democrats.  Alto- 
gether the  movement  proved  abortive,  and  the  pastors  have  long 
since  turned  aside  to  other  interests. 

In  Switzerland  also  the  movement  is  making  considerable 
headway,  and  in  Professor  Ragaz  and  Pastors  Kutter  *  and  Pfliiger, 
the  latter  of  whom  has  recently  been  made  a  deputy,  it  has  found 
advocates  whose  views  are  at  any  rate  sufficiently  advanced. 

refers  us  to  Matthew  xx,  6,  and  on  the  still  more  vexed  question  of  the  closed  or 
open  shop  we  are  referred  to  1  Corinthians  xii,  16,  26.  We  must  also  mention 
Rausohenbusch's  eloquent  book,  Christianity  and  the  Social  Crisis. 

The  well-known  economist  Professor  Richard  T.  Ely  is  another  of  the  leaders 
of  this  movement.  Nor  must  we  omit  Herron,  who  caused  some  sensation 
by  declaring  that  it  is  necessary  to  go  well  beyond  collectivism,  which 
he  thinks  altogether  too  conservative  and  reactionary.  He  adds  that  Karl 
Marx  is  a  crusted  Tory  compared  with  Jesus,  "  for  any  one  who  accepts  private 
property  in  any  form  whatsoever,  even  in  matters  of  consumption,  must  reject 
Christ." 

1  At  a  conference  held  at  Geneva  in  1891.  At  this  conference  M.  Stocker 
defined  his  programme  as  follows :  "  We  do  not  believe  that  we  can  do  anything 
without  the  State,  but  we  also  believe  in  the  spirit  of  association.  We  have 
told  the  masters  that  their  duty  is  to  make  some  sacrifice  for  the  sake  of 
solving  the  question  in  a  way  that  will  be  agreeable  to  their  men.  We  have 
also  told  the  workers  that  they  must  work  hard,  economically,  and  conscientiously, 
even  if  they  never  obtain  a  better  situation." 

1  He  was  formally  repudiated  by  the  Emperor  in  1896  in  a  telegram  addressed 
to  a  powerful  employer,  Baron  Stumm. 

•  Goehre  is  the  author  of  a  work  entitled  Three  Months  in  a   Workshop. 
The  book  has  been  a  great  success  and  has  produced  a  crop  of  imitations. 

*  Kutter's  book  Sie  Mussen  caused  quite  a  flutter.     The  author  attempts  to 
show  that  the  socialists  are  to-day  the  real  disciples  of  Christ,  but  have  been  dis- 
owned by  the  Church. 


508        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

In  France  there  is  at  least  one — there  may  possibly  be  more — 
Social  Protestant  school.  But  as  it  only  includes  a  small  fraction  of 
Protestantism,  which  is  itself  in  a  hopeless  minority,  its  influence  is 
not  very  great.  There  are  several  important  social  movements, 
however,  such  as  the  crusades  against  alcoholism  and  pornography, 
the  revival  of  co-operation  and  the  demand  for  the  erection  of 
"  People's  Palaces  " — known  as  Solidaritis — which  are  entirely 
due  to  the  activities  of  this  school.  An  association  for  the 
inductive  study  of  social  questions  was  founded  in  1887  by  Pastor 
Gouth,  another  pastor  named  Tomy  Fallot  being  its  president  and 
inspirer.1  At  first  the  demands  of  this  group  were  extremely 
moderate,  co-operation  being  their  only  mode  of  action  and  solidarity 
their  social  doctrine.2  This  new  doctrine  of  solidarity,  although 
rather  belonging  to  the  Radical  wing,  being  the  very  antithesis  of 
Christian  charity,  as  we  shall  see  by  and  by,  has  been  enthusiastically 
welcomed  by  the  Social  Protestants.  The  Protestants  even  claim 
that  it  was  originally  their  own  peculiar  doctrine,  and  that  other 
schools  merely  borrowed  it ;  for  where  can  be  found  a  fuller  expres- 
sion of  the  law  of  solidarity  than  the  two  Christian  doctrines  of  the 
fall  and  redemption  of  man  ?  "  For  as  in  Adam  all  die,  even  so  in 
Christ  shall  all  be  made  alive." 

Curiously  enough  there  is  another  group  of  young  pastors  who 
closely  resemble  what  is  known  in  Catholic  circles  as  the  Abbots'  Party. 
They  are  dissatisfied  with  the  moderate  claims  of  the  Catholics  as  a 
whole,  and  like  their  American  colleagues  they  demand  the  establish- 
ment of  a  form  of  collectivism.3  They  think,  at  any  rate,  that  the 

1  For  the  past  twenty  years  M.  de  Boyve,  the  leader  of  the  co-operative 
movement  in  France,  has  been  the  president,  which  confirms  us  in  the  suspicion 
that  the  two  schools  had  a  common  parentage,  both  really  springing  from  the 
Ecole  de  Nimes.  Periodical  congresses  are  held  in  connection  with  it,  and  it 
also  has  a  review  called  Le  Christianisme  Social. 

1  Pastor  Tomy  Fallot,  the  initiator  of  this  movement,  indicates  the  path 
that  should  be  followed  thus  :  "  The  essential  thing  is  to  get  a  rough  outline  of 
that  perfect  type  which  is  known  as  co-operation.  Just  now  it  seems  the  only 
thing  that  contains  a  prophecy  of  better  times."  (V 'Action  Bonne.)  Compare 
this  with  Maurice's  formula. 

"  We  are  Social  Christians  because  we  are  solidarists.  In  our  search  for 
solidarity  we  have  found  the  Messiah  and  His  Kingdom.  Solidarity  is  the  lay- 
man's term,  the  Kingdom  of  God  the  theologian's,  but  the  two  are  the  same." 
(Gounelle,  U Avant-Garde,  1907.) 

*  This  group  found  its  earliest  recruits  among  the  young  pastors  who  ministered 
in  the  great  industrial  towns  (M.  Wilfred  Monod  at  Rouen  and  M.  Gounelle  at 
Roubaix,  for  example),  and  thus  found  itself  in  close  touch  with  poverty,  suffer- 
ing, and  discontent.  But  several  laymen  have  also  joined  it,  among  them  being  a 


SOCIAL  PROTESTANTISM  509 

question  of  property  ought  to  come  up  for  consideration  almost 
immediately. 

In  short,  it  seems  true  to  say  that  in  almost  every  country  Social 
Christianity  is  gradually  evolving  into  Christian  Socialism,  and  the 
change  of  title  is  an  index  to  the  difference  of  attitude.  In  other 
words,  Social  Protestantism  accepts  the  essential  principles  of 
international  socialism,  such  as  the  socialisation  of  the  means  of 
production,  class  war,  and  internationalism,  and  endeavours  to  show 
that  they  are  in  complete  accordance  with  the  teaching  of  the 
Gospels. 

But  the  stress  which  it  lays  upon  the  necessity  for  moral  reform 
saves  Social  Protestantism  from  being  hopelessly  confused  with 
collectivism,  and  the  fact  that  it  believes  that  individual  salvation 
is  impossible  without  social  transformation  helps  to  distinguish  it 
from  individual  Protestantism.1  Conversion  implies  a  change  of 
environment.  What  is  the  use  of  preaching  chastity  when  people 
have  to  sleep  together  in  the  same  room  without  distinction  of  age 
or  of  sex  ?  "  Society,"  says  Fallot,  "  ought  to  be  organised  in  such 
a  fashion  that  salvation  is  at  least  possible  for  everyone."  "  The 
regime  of  the  great  industry,"  says  M.  Gounelle,  "is  the  greatest 
obstacle  to  the  salvation  of  sinners  that  the  religion  of  Christ 
has  yet  met."  Protestant  Socialism  remains  individualistic  in  the 
sense  that  while  seeking  to  suppress  individualism  in  the  form  of 
egoism  as  a  centripetal  force,  it  wishes  to  uphold  it  and  to  strengthen 
it  as  a  principle  of  disinterested  activity — as  a  centrifugal  force.  It 
takes  for  its  motto  those  words  of  Vinet  which  may  be  found  carved 
on  the  pedestal  of  his  statue  at  Lausanne :  "  I  want  man  to  be  his 
own  master  in  order  that  he  may  give  better  service  to  everybody 
else."  a 

son  of  the  economist  who  was  regarded  as  the  doyen  of  the  Liberal  school — 
Frederic  Passy. 

The  Christian  Socialist  group  publishes  a  journal  of  its  own,  entitled  UEtpoir 
du  Monde. 

1  " «  For  I  could  wish  that  myself  were  accursed  from  Christ  for  my  brethren,' 
writes  St.  Paul ;  in  other  words, '  I  do  not  want  to  be  saved  alone,  and  I  shall  be 
completely  saved  only  when  humanity  as  a  whole  has  been  saved.'  And  so  the 
evangelical  doctrine  would  subordinate  the  full  realisation  of  my  personal 
salvation  to  the  salvation  of  others."  (W.  Monod,  La  Notion  apostolique  du 
Salut.) 

•  Or,  as  he  epitomises  it  elsewhere,  "  It  is  useless  to  speak  of  giving  ourielvti 
until  we  are  certain  that  we  own  ourselvei." 


510        DOCTRINES  INSPIRED  BY  CHRISTIANITY 


IV :   THE  MYSTICS 

No  review  of  Christian  Social  doctrines,  however  summary,  can 
afford  to  omit  the  names  of  certain  eminent  writers  who,  though 
belonging  to  none  of  the  above-mentioned  schools,  and  having  no 
definite  standing  either  as  socialists  or  economists,  being  for  the 
most  part  litterateurs,  historians,  and  novelists,  have  nevertheless 
lent  the  powerful  support  of  their  eloquence  to  the  upholding  of 
somewhat  similar  doctrines.1 

Tolstoy  and  Ruskin  are  the  best  known  representatives  of  this 
movement  on  the  borderland  of  Social  Christianity,  although  they 
are  by  no  means  the  only  ones.2  These  two  grand  old  men,  who 
both  died  at  an  advanced  age,  appeared  to  their  contemporaries  in 
much  the  same  light  as  the  prophets  of  old  did  to  Israel.  True 
descendants  of  Isaiah  and  Jeremiah,  they  exultantly  prophesied  the 
downfall  of  capitalism — the  modern  Tyre  and  Si  don — and  announced 
the  coming  of  the  New  Jerusalem — the  habitation  of  justice.  Their 
language  even  is  modelled  on  Holy  Writ,  and  Ruskin,  we  know,  was 
from  his  youth  upwards  a  diligent  reader  of  the  Bible.3  Both  of 
them  condemn  the  Hedonistic  principle  and  denounce  money  as  an 
instrument  of  tyranny  which  has  resulted  in  setting  up  something 
like  a  new  system  of  slavery,4  and  they  both  advocate  a  return  to 
manual  labour  as  the  only  power  that  can  free  the  individual  and 
regenerate  social  life.  They  differ,  however,  in  their  conception  of 
future  society,  which  to  Ruskin  must  be  aristocratic,  chivalrous,  and 
heroic,  while  Tolstoy  lays  stress  upon  its  being  equalitarian,  com- 
munal, and  above  all  ethical.  The  one  looks  at  society  from  the 

1  Ruskin  himself  did  not  think  that  his  doctrines  were  only  of  slight  importance. 
The  introduction  to  Munera  Pulveris  (1862)  contains  the  following  words  j  "  The 
following  pages  contain,  I  believe,  the  first  accurate  analysis  of  the  laws  of  Political 
Economy  which  has  been  published  in  England." 

See  also  the  preface  to  Unto  This  Last,  which  has  for  its  sub-title  "  Four  Essays 
on  the  First  Principles  of  Political  Economy." 

1  There  are  a  great  number  of  novels  dealing  with  social  questions.  For  the 
English  novels  bearing  on  this  topic  see  M.  Cazamian,  Le.  Roman  social. 

*  So  much  was  this  the  case  with  Ruskin  that  Mme.  Brunhea  has  published 
»  book  called  Ruskin  et  la  Bible,  and  Tolstoy  on  his  side  has  an  edition  of 
the  Gospels  to  his  credit  which  is  said  to  be  much  nearer  the  original  than  the 
ordinary  version  of  the  canon. 

•  See  Fora  Clavigera,  passim.    Tolstoy  writes  in  a  similar  strain.    Money  is 
just  a  conventional  sign  giving  the  right  or  the  possibility  of  claiming  the  service 
of  others.      But  although  money  is  all-powerful  in  the  matter  of  exploiting  the 
worker  it  is  quite  useless  when  it  comes  to  a  question  of  furthering  his  well-being. 
There  is  a  curious  development  of  this  thesis  in  Tolstoy's  What  is  to  be  Done  f 


THE  MYSTICS  511 

standpoint  of  an  aesthete,  the  other  from  that  of  a  muzhik  :  the  one 
would  breed  heroes,  the  other  saints. 

Thomas  Carlyle  also  deserves  mention.  Among  the  numerous 
books  which  he  wrote  we  may  mention,  among  others,  his  French 
Revolution  (1837)  and  his  Heroes  and  Hero-worship.  Chronologically 
he  precedes  both  Tolstoy  and  Ruskin,  and  his  influence  upon 
economic  thought  was  greater  than  either  of  theirs.  But  we 
could  hardly  put  him  among  the  Christian  Socialists  because  of  his 
extreme  individualism,  and  if  he  were  to  be  given  a  place  at  all  it 
would  be  with  such  writers  as  Ibsen  and  Nietzsche.  His  economic 
ideas,  however,  run  parallel  to  Ruskin's ;  and  nowhere  except 
perhaps  in  the  choruses  of  the  old  Greek  tragedies  do  we  get  any- 
thing approaching  the  passion  which  is  displayed  in  their  declamations 
against  the  present  economic  order.1 

Carlyle  is  possibly  the  strongest  adversary  that  the  old  Classical 
school  ever  encountered.  It  was  he  who  spoke  of  political  economy 
as  "  the  dismal  science."  That  abstract  creation  of  the  Classicists, 
the  economic  man,  afforded  him  endless  amusement,  and  he  very 
aptly  described  their  ideal  State  as  '*  anarchy  plus  the  police- 
man." He  is  no  less  fierce  in  his  denunciation  of  laissez-faire  as  a 
social  philosophy.8  But  he  left  us  no  plan  of  social  reconstruction, 
being  himself  content  to  wait  upon  individual  reform — a  trait  which 
brings  him  into  intimate  connection  with  the  Christian  Socialists.3 

Ruskin,  on  the  other  hand,  has  given  us  a  programme  of  social 
regeneration  which  might  be  summarised  as  follows  :  * 

1.  Manual  labour  should  be  compulsory  for  everybody.  His 
readers  were  reminded  of  those  words  of  St.  Paul,  "  If  any  would 
not  work,  neither  should  he  eat."  He  thought  it  both  absurd  and 

1  "  All  this  baa  oome  of  the  spreading  of  that  thrice  accursed,  thrice  impious 
doctrine  of  the  modern  economist,  that  « To  do  the  best  for  yourself,  is  finally 
to  do  the  beat  for  others.'  Friends,  our  great  Master  said  not  so."  (Ruskin, 
Crown  of  Wild  Olive,  Lecture  II). 

*  Especially  in  that  celebrated  passage  I    "  It  [Political  Economy]  sounds 
with  Philosophico-Politice-Economic  plummet  the  deep  dark  sea  of  troubles, 
and  having  taught  us  rightly  what  an  infinite  sea  of  troubles  it  is  sums  up  with 
the  practical  inference  and  use  of  consolation  that  nothing  whatever  can  be 
done  in  it  by  man,  who  has  simply  to  sit  still  and  look  wistfully  to  '  time  and 
general  laws,'  and  thereupon  without  so  much  as  recommending  suicide  coldly 
takes  its  leave  of  us."     (Chartism.) 

*  "  If  thou  ask  again  .  .  .  What  is  to  be  done  ?  allow  me  to  reply :  By  thee, 
for  the  present,  almost  nothing.  .  .  .  Thou  shalt  descend  into  thy  inner  man, 
and  see  if  there  be  any  traces  of  a  soul  there  ;  till  then  there  can  be  nothing 
done  !  .  .  .  Then  shall  we  discern,  not  one  thing,  but,  in  clearer  or  dimmer 
sequence,  a  whole  endless  host  of  things  that  can  be  done.     Do  the  first  of  these." 
(Ptut  and  Present.  Book  I,   chap.  4.)  *  Bee  particularly  Fora  Clavigtro. 


512        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

immoral  that  a  man  should  live  in  idleness  merely  by  using  money 
inherited  from  his  ancestors  to  pay  for  the  services  of  his  fellow-men. 
Life  is  the  only  real  form  of  payment ;  in  other  words,  labour  ought 
to  be  given  in  return  for  labour.  To  live  upon  the  fruits  of  dead 
labour  is  surely  absurd  and  contradictory.  And  it  must  be  real 
human  labour.  Machinery  of  all  kinds  must  be  renounced  except 
that  which  may  be  driven  by  wind  or  water — natural  forces  which, 
unlike  coal,  do  not  defile,  but  rather  purify. 

Ruskin  wanted  labour  to  be  artistic,  and  he  longed  to  see  the 
artisan  again  become  an  artist  as  he  was  in  the  Middle  Ages  (which  is 
a  somewhat  hasty  generalisation  perhaps).  In  practice  this  is  not 
very  easy.  Some  of  his  immediate  disciples  have  set' up  as  artistic 
bookbinders,  but  the  number  of  people  who  can  find  employment 
at  such  trades  must  be  exceedingly  few. 

Tolstoy,  on  the  other  hand,  does  not  strive  for  artistic  effect. 
His  heart  is  set  upon  rural  work,  which  he  magnificently  describes  as 
"  bread  work,"  and  which  seemed  to  him  sufficiently  noble  without 
embellishment  of  any  kind. 

2.  Work  for  everyone  is  the  natural  complement  and  the  neces- 
sary corrective  of  the  preceding  rule  of  no  idleness  and  no  unem- 
ployment. In  society  as  at  present  organised  everybody  is  not 
obliged  to  work,  while  some  individuals  are  obliged  to  be  idle.1  This 
monstrous  inequality  must  be  remedied.  There  would  be  no 
difficulty  about  finding  plenty  of  work  for  everyone  if  everyone  did 
something.  Under  such  a  system  there  would  be  no  unemployment, 
although  there  would  be  more  leisure  for  some. 

8.  Labour  would  no  longer  be  paid  for  according  to  the  exigencies 
of  demand  and  supply,  which  tend  to  reduce  manual  work  to  the 
level  of  a  mere  commodity.  It  would  be  remunerated  according  to 
the  eternal  principles  of  justice,  which  would  not  of  necessity  imply  an 
appeal  to  any  written  law,  but  solely  to  custom,  which  even  now 
fixes  the  salaries  of  doctors,  lawyers,  and  professors.  In  these 
professions  there  are  no  doubt  some  individual  inequalities,  but 
there  is  also  the  norm,  and  it  is  a  breach  of  professional  etiquette 
to  take  less  than  this.  The  norm  does  occasionally  find  expression 
in  the  rules  of  the  association,  and  in  some  such  way  Ruskin  would 
fix  not  merely  a  minimum  but  also  a  maximum  wage.  Whatever 
profession  a  person  follows,  whether  he  be  workman,  soldier,  or 
merchant,  he  should  always  work  not  merely  for  profit  but  for  the 

1  "  Why,  the  four-footed  worker  has  already  got  all  that  this  two-handed  one 
IB  clamouring  for,  and  you  say  it  is  impossible."  (Carlyle,  Past  and  Present, 
chap.  3 ;  and  see  also  Chartism,  chap.  4.) 


THE  MYSTICS  513 

social  good.  He  must,  of  course,  be  suitably  rewarded  if  his  position 
as  a  worker  is  to  be  maintained  and  the  work  itself  efficiently 
performed,  but  it  can  never  be  done  if  gain  becomes  the  end  and 
labour  merely  the  means. 

4.  The  natural  sources  of  wealth — land,  mines,  and  waterfalls 

and  the  means  of  communication  should  be  nationalised. 

5.  A  social  hierarchy  graded  according  to  the  character  of  the 
services  rendered  should  be  established.     The  gradation  must  be 
accepted  in  no  intolerant  spirit,  and  must  be  respected  by  everybody. 
Chivalry  is  as  necessary  in  an  industrial  as  in  a  military  society,  and 
a  new  crusade  against  Mammonism  l  should  be  preached  both  far 
and  wide. 

6.  Above  all  else  must  come  education — not  mere  instruction. 
What  needs  developing  above  everything  is  a  sense  of  greatness,  a 
love  of  beauty,  respect  for  authority,  and  a  passion  for  self-sacrifice. 
What  especially  need  acquiring  are  the  faculties  of  admiration,  of 
hope,  and  of  love.2 

Only  the  last  item  on  the  programme  seems  anywhere  near 
realisation,  but  that  by  itself  would  justify  our  reference  to  Ruskin's 
scheme.  Not  only  has  the  suggestion  resulted  in  the  creation  of 
working  men's  colleges  at  Oxford  and  of  Ruskin  Colleges  elsewhere, 
but  it  has  also  given  rise  to  the  garden  city  movement.  These 
new  cities  are  built  with  the  express  purpose  of  relieving  the  worst 
features  of  industrial  life,  and  are  so  planned  as  not  to  interfere  in 
any  way  either  with  the  beauties  of  nature  or  with  the  health  of 
the  citizens.8 

Ruskin  speaks  of  himself  somewhere  as  an  out-and-out  com- 
munist, but  his  communism  had  also  a  touch  of  the  aristocrat  and 
the  aesthete  about  it  which  possibly  proved  a  recommendation  in 
English  society.  Tolstoy  is  a  much  more  thoroughgoing  com- 
munist, and  is  violently  opposed  to  "  that  low,  bestial  instinct  which 
men  call  the  right  of  private  property."  *  His  cry  was  "  Back  to  the 

1  This  was  the  ideal  which  he  had  in  mind  in  founding  the  Guild  of  St.  George. 
See  an  article  by  Professor  Marshall,  The  Social  Possibilities  of  Economic  Chivalry, 
in  the  Economic  Journal,  March  1907.  There  ia  no  reference  to  Buskin  in  it, 
however. 

1  When  the  Christian  Socialists  in  1854  organised  a  course  of  lecture*  for 
working  men  in  London  Ruskin  volunteered  to  give  a  few  addresses,  not  on  social 
economics  or  on  history,  but  on  drawing. 

*  One  naturally  thinks  first  of  such  industrial  villages  as  Bournville  and  Port 
Sunlight.  But  in  1903  an  entirely  new  city  of  this  kind  was  begun  at  Letch- 
worth,  Herts.  The  idea  has  recently  undergone  a  considerable  development 
by  a  society  that  owes  ita  inspiration  to  Ruskin. 

4  Story  of  a  Horte,  in  his  Fir*  Stories  (1861). 


514        DOCTRINES  INSPIRED  BY  CHRISTIANITY 

land,"  and  the  practice  of  coaration;  his  ideal  the  mir.  He  was 
not  anxious  to  know  that  everyone  was  working  at  some  trade  or 
other,  but  he  thought  everyone  ought  to  produce  his  own  food, 
which  is  the  one  inevitable  law  of  human  existence.  Division  of 
labour,  which  has  been  so  extravagantly  praised  by  economists,  he 
thought  of  as  a  mere  machination  of  the  devil  enabling  men  to  evade 
the  Divine  commandment.  At  any  rate  it  should  only  be  adopted 
when  the  need  for  it  arises,  and  after  consultation  with  all  the  parties 
interested,  and  not  indiscriminately,  as  is  at  present  the  case,  with 
competition,  over-production,  and  crises  as  the  result.1 

If  we  are  to  take  Tolstoy's  words  literally,  as  he  suggested  we 
should  take  Christ's  words,  then  the  society  that  he  dreamt  of  is 
very  far  beyond  even  the  communist  ideal.  More  towns,  more 
commerce,  more  subdivision  of  trades,  more  money,  more  art  for 
art's  sake — such  was  to  be  the  economic  Nirvana  of  the  communists. 

1  See  a  book  entitled  Labour,  which  consists  of  the  meditations  of  a  muzhik 
called  Bondareff  upon  those  words  of  Genesis,  "  In  the  sweat  of  thy  face  shalt  thou 
eat  bread,"  followed  by  a  long  commentary  by  Tolstoy. 


BOOK  Y :  RECENT  DOCTRINES 

IN  the  earlier  sections  of  this  work  no  special  difficulty  was  experi- 
enced in  giving  the  essential  traits  of  the  economic  thought  of  each 
period.  But  on  the  threshold  of  this  last  book  we  naturally  feel 
some  trepidation.  The  newer  theories  can  scarcely  be  said  to  have 
fallen  into  their  true  perspective,  and  their  full  import  is  not  clear 
to  us  contemporaries.  Here,  if  anywhere,  we  shall  run  the  risk  of 
being  arbitrary  in  our  choice.  It  seems  to  us,  however,  that  the 
economic  thought  of  the  end  of  the  nineteenth  and  the  beginning 
of  the  twentieth  centuries  reveals  at  least  four  dominant  tendencies. 

1.  In  the  first  place  there  is  a  quite  unexpected  revival  of 
theoretical  studies.     Pure  economic  theory,  which  had  been  de- 
liberately neglected    by  the  Historical  school,  by  the  State  and 
Christian  Socialists,  was  in  1875  again  taken  up  by  a  group  of  eminent 
writers  who  flourished  in  England,  France,  and  Austria.     With  the 
aid  of  conceptions  that  had  not  been  in  current  use  since  the  days  of 
Condillac,    coupled   with   the    application    of    the    mathematical 
method,  which  had  not  been  attempted  since  the  time  of  Cournot, 
they  have  succeeded  in  substituting  an  attractive  and  ingenious 
theory  of  prices  for  the  somewhat  halting  hypothesis  put  forth  by 
the  Classical  theorists.     The  success  of  the  method  in  other  fields 
of  economic  inquiry  is  every  day  enhancing  its    reputation.     A 
number  of  writers  both  in  America  and  Europe  (excepting  France, 
perhaps)  are  engaged    upon  this  task,  following  in   the  wake  of 
Walras,  of  Jevons,  and  of  Menger.    Diagrams,  algebraical  formulae, 
and  subtle  reasoning  again  characterise  the  works  of  economists. 
Pure  economics,  so  much  decried  since  the  days  of  Ricardo,  has 
once  more  justified  its  claim  to  a  position  of  honour,  and  despite 
keen  opposition  it  is  attracting  attention  everywhere.     From  the 
point  of  view  of  economic  science  this  is  the  most  notable  fact  of 
recent  years. 

2.  Parallel  with  this  has  gone  on  a  profound  change  in  socialism. 
We  have  already  shown  in  the  course  of  the  preceding  book  the 
transformations  undergone  by  Marx's  ideas  at  the  hands  of  even 
his  own  followers.     The  decline  is  equally  evident  everywhere  else. 
All  pretension  to  set  up  a  proletarian  in  opposition  to  a  bourgeois 
economics  has  been  renounced.     "  It  is  necessary,"  says  M.  Sorel 
somewhere,  "  to  abandon  every  thought  of  transforming  socialism 

515 


516  RECENT  DOCTRINES 

into  a  science."  In  fact,  French  syndicalists,  English  Fabians, 
and  German  revisionists  have  rallied  with  more  or  less  good  grace 
to  the  scientific  ideas  of  Pareto,  Marshall,  or  Bohm-Bawerk.  But 
the  real  reason  for  this  change  of  attitude  is  the  strong  desire  to 
devote  themselves  with  greater  vigour  to  the  social  and  political 
demands  of  socialism.  The  general  strike,  the  creation  of  syndicate, 
the  establishment  of  co-operative  societies,  and  the  problems  of 
municipal  socialism  are  attracting  more  and  more  attention,  whereas 
the  theory  of  surplus  value  is  falling  into  the  background.  Even 
more  striking  still,  as  we  shall  see,  is  the  attempt  made  by  some 
of  them,  especially  the  advocates  of  land  nationalisation — to  recon- 
cile Liberalism  and  socialism  upon  the  basis  of  a  doctrine  that  is 
Classical  par  excellence — the  theory  of  rent. 

8.  This  is  not  the  only  change  that  socialism  has  undergone. 
The  ideal  of  collectivism  which  long  prevailed  among  the  working 
classes  was  that  of  a  centralised  sovereign  authority,  and  the  active 
part  taken  by  the  collectivist  party  in  the  legislative  and  even  in  the 
administrative  work  of  some  countries  still  further  encouraged  this 
belief.  But  the  old  revolutionary  spirit,  always  individualistic  to 
the  core,  was  still  alive,  especially  in  the  Latin  countries,  and  it 
began  to  show  signs  of  impatience  at  the  turn  things  had  taken. 
And  so  we  witness  among  the  working  classes  a  revival  of  Liberalism, 
harsh  and  violent  in  its  expression  perhaps,  and  doubtless  very 
different  from  the  founders'.  Smith  and  Bastiat  would  have  some 
difficulty  in  recognising  it,  and  with  a  view  to  avoiding  confusion 
with  the  older  doctrine  it  has  assumed  the  name  libertaire,  but  is 
generally  known  by  the  no  less  authentic  title  of  "  anarchism."  This 
tendency  towards  extreme  individualism  and  anarchy,  of  which  there 
is  unmistakable  evidence  even  in  the  annals  of  the  International,  has 
gained  the  ascendancy  over  the  working  classes,  leaving  a  deep 
mark  upon  the  recent  syndicalist  movement  in  France  and  Italy. 
At  the  same  time  there  has  also  appeared  among  writers  of  the 
bourgeois  class  a  kind  of  philosophical  and  moral  anarchism  which 
affords  further  proof  of  the  revival  of  individualism. 

4.  Owing  to  these  transformations  in  the  theories  of  individualism 
and  socialism,  that  other  doctrine  which  in  an  earlier  book  went  by 
the  name  of  State  Socialism  has  also  undergone  a  change.  In 
France,  at  any  rate,  it  has  reappeared  under  the  name  of  Solidarism, 
which  attempts  a  justification  of  State  intervention  by  basing 
it  on  new  foundations  and  confining  it  within  just  limits.  It 
thus  really  represents  an  effort  at  synthesising  individualism  and 
socialism. 


THE  HEDONISTS  517 

These  are  the  main  currents  which  we  have  attempted  to  describe 
in  the  following  chapters.  By  describing  them  as  recent  doctrines 
our  aim  was  not  to  emphasise  the  date  of  their  appearance — which 
indeed  is  often  in  the  distant  past — but  to  show  that  they  are  merely 
a  fresh  effort  to  rejuvenate  the  older  theories  of  which  they  are 
the  latest  manifestation.  We  might  perhaps  have  borrowed  a  term 
from  another  domain  and  referred  to  them  as  modernist  doctrines 
did  it  not  seem  rash  to  group  under  a  perfectly  definite  term  con- 
ceptions that  are  so  very  diverse  in  character  and  which  have  nothing 
more  than  a  chronological  order  binding  them  together. 


CHAPTER  I :   THE  HEDONISTS 

I  :   THE  PSEUDO-RENAISSANCE  OF  THE 
CLASSICAL  SCHOOL 

IF  we  are  to  give  this  new  doctrine  its  true  setting  we  must  return 
for  a  moment  to  our  study  of  the  Historical  school.  The  criticism 
of  that  school,  as  we  have  already  seen,  was  directed  chiefly  against 
the  method  of  the  Classical  writers.  The  faith  which  their  pre- 
decessors had  placed  in  the  permanence  and  universality  of  natural 
law  was  scornfully  rejected,  and  the  possibility  of  ever  founding  a 
science  upon  a  chain  of  general  propositions  emphatically  denied. 
Political  economy,  so  it  was  decreed,  was  henceforth  to  be  con- 
cerned merely  with  the  classification  of  observed  facts. 

It  would  not  have  been  difficult  to  foretell  that  the  swing  of  the 
pendulum — in  accordance  with  that  strange  rhythm  which  is  such 
a  feature  of  the  history  of  thought — would  at  the  opportune  moment 
cause  a  reversion  to  the  abstract  method.  That  is  exactly  what 
happened.  Just  at  the  moment  when  Historical  study  seemed  to 
be  triumphantly  forging  ahead — that  is,  about  the  years  1872-74 — 
several  eminent  economists  in  Austria,  England,  Switzerland,  and 
America  suddenly  and  simultaneously  made  their  appearance  with 
an  emphatic  demand  that  political  economy  should  be  regarded 
as  an  independent  science.  They  brought  forward  the  claims 
of  what  they  called  pure  economics.  Naturally  enough  there 
ensued  the  keenest  controversy  between  the  champions  of  the 
two  schools,  notably  between  Professors  Schmoller  and  Karl 
Menger. 

The  new  school  had  one  distinctive  characteristic.  In  its  search 
for  a  basis  upon  which  to  build  the  new  theory  it  hit  upon  the 


518  THE  HEDONISTS 

general  principle  that  man  always  seeks  pleasure  and  avoids  pain, 
getting  as  much  of  the  former  with  as  slight  a  dilution  of  the 
latter  as  he  possibly  can.1  A  fact  of  such  great  importance  and 
one  that  was  not  confined  to  the  field  of  economic  activities,  but 
seemed  present  everywhere  throughout  nature  in  the  guise  of  the 
principle  of  least  resistance,  could  scarcely  have  escaped  the  notice 
of  the  Classical  theorists.  They  had  referred  to  it  simply  as 
"  personal  interest,"  but  to-day  we  speak  of  it  as  Hedonism, 
from  the  Greek  fiSovrj  (pleasure  or  agreeableness).  Hence  the 
name  Hedonists,  by  which  we  have  chosen  to  designate  these  two 
schools. 

The  elimination  of  all  motives  affecting  human  action  except 
one  does  not  imply  any  desire  on  the  part  of  these  writers  to  deny 
the  existence  of  others.  They  simply  lay  claim  to  the  right  of 
abstraction,  without  which  no  exact  science  could  ever  be  con- 
stituted. In  other  words,  they  demand  the  right  of  eliminating 
from  the  field  of  research  every  element  other  than  the  one  which 
they  wish  to  examine.  The  study  of  the  other  motives  belongs  to 
the  province  of  other  social  sciences.  The  homo  osconomicus  of  the 
Classicals  which  has  been  the  object  of  so  much  derision  has  been 
replaced  on  its  pedestal.  But  it  has  in  the  meantime  undergone 
such  a  process  of  simplification  that  it  is  scarcely  better  than  a 
mere  abstraction.  Men  are  again  to  be  treated  as  forces  and 
represented  by  curves  or  figures  as  in  treatises  on  mechanics.  The 
object  of  the  study  is  to  determine  the  interaction  of  men  among 
themselves,  and  their  reaction  upon  the  external  world. 

We  shall  also  find  that  the  new  schools  arrive  at  an  almost 
identical  conclusion  with  the  old,  namely,  that  absolutely  free 
competition  alone  gives  the  maximum  of  satisfaction  to  everybody. 
Allowing  for  the  differences  in  their  respective  points  of  view,  to 
which  we  shall  refer  later  on,  what  is  this  but  simply  a  revival  of 
the  great  Classical  tradition  ? 

Little  wonder,  then,  that  we  find  a  good  deal  of  sympathy  shown 
for  the  old  Classical  school.  Indeed,  it  is  throughout  regarded  with 
almost  filial  piety.2 

1  "  Pleasure  and  pain  are  undoubtedly  the  ultimate  objects  of  the  calculus  of 
economics.     To  satisfy  our  wants  to  the  utmost  with  the  least  effort,  to  procure 
the  greatest  amount  of  what  is  desirable  at  the  expense  of  the  least  that  is  un- 
desirable, in  other  words,  to  maximise  pleasure,  is  the  problem  of  economics." 
(Stanley  Jevons,  Theory  of  Political  Economy,  p.  40.) 

2  "  The  errors  of  the  Classical  school  are,  so  to  speak,  the  ordinary  diseases 
of  the  childhood  of  every  science."     (Bohm-Bawerk,  The  Austrian  Economists,  in 
Annals  of  the  American  Academy  of  Political  and  Social  Science  January  1891.) 


PSEUDO-RENAISSANCE  OF  THE  CLASSICAL  SCHOOL  510 

This  does  not  mean  that  the  Classical  doctrine  is  treated  as 
being  wholly  beyond  reproach,  although  it  does  mean  that  the 
new  school  could  scarcely  accuse  it  of  being  in  error,  seeing  that 
it  comes  to  similar  conclusions  itself.  But  what  it  does  lay  to  the 
charge  of  the  older  writers  is  a  failure  to  prove  what  they  assumed 
to  be  true  and  a  tendency  to  be  satisfied  with  a  process  of  reasoning 
which  too  often  meant  wandering  round  in  a  hopeless  circle. 
Especially  was  this  the  case  with  their  study  of  causal  relations, 
forgetting  that  as  often  as  not  cause  was  effect  and  effect  cause. 
The  attempt  to  determine  which  is  cause  and  which  effect  is  clearly 
futile,  and  the  science  must  rest  content  with  the  discovery  of 
uniformities  either  of  sequence  or  of  coexistence. 

This  applies  especially  to  the  three  great  laws  which  form  the 
framework  of  economic  science,  namely,  the  law  of  demand  and 
supply,  the  law  of  cost  of  production,  and  the  law  of  distribution, 
none  of  which  is  independent  of  the  others.  Let  us  review  them 
briefly. 

The  law  stating  that  "  price  varies  directly  'with  demand  and 
inversely  with  supply  "  possessed  just  that  degree  of  mathematical 
precision  necessary  to  attract  the  attention  of  the  new  writers.  In 
fact,  it  just  served  for  the  passage  from  the  old  to  the  new  economics. 
But  no  sooner  was  the  crossing  effected  than  the  bridge  was  destroyed. 
Little  difficulty  was  experienced  in  pointing  out  that  this  so-called 
law  which  had  been  considered  to  be  one  of  the  axioms  of  political 
economy,  the  quid  inconcussum  upon  which  had  been  raised  all  the 
superstructure  of  economic  theory,  was  an  excellent  example  of  that 
circular  reasoning  of  which  we  have  just  spoken.  There  was  a 
considerable  flutter  among  the  economists  of  the  mid-nineteenth 
century  when  they  found  themselves  forced  to  recognise  this. 
However  true  it  may  be  that  price  is  determined  by  demand  and 
supply,  it  is  equally  true  that  demand  and  supply  are  each  in  their 
turn  determined  by  the  price,  so  that  it  is  impossible  to  tell  which 
is  cause  or  which  is  effect.  Stuart  Mill  had  already  noted  this 
contradiction,  and  had  attempted  correction  in  the  way  already 
described  (p.  359).  But  he  was  ignorant  of  the  fact  that  Cournot 
had  completely  demolished  the  formula  by  setting  up  another  in  its 
place,  namely,  that  "  demand  is  a  function  of  price."  *  The  sub- 
stitution of  that  formula  marks  the  inauguration  of  the  Hedonistic 
calculus.  Demand  is  now  shown  to  be  connected  with  price  by  a 
kind  of  see-saw  movement,  falling  when  prices  rise  and  rising  when 
prices  fall.  Supply  is  equally  a  function  of  price,  but  it  operates  in 

1  Recherche*  »w  let  Principe*  mathematique*  de  la  Thiorie  det  Riehesae*. 


520  THE  HEDONISTS 

the  opposite  fashion,  moving  part  passu  with  it — rising  as  it  rises 
and  falling  as  it  falls.  Thus  price,  demand,  and  supply  are  like 
three  sections  of  one  mechanism,  none  of  which  can  move  in 
isolation,  and  the  problem  is  to  determine  the  law  of  their  inter- 
dependence. 

This  does  not  by  any  means  imply  that  there  is  no  longer  any 
place  in  economics  for  the  law  of  demand  and  supply.  It  has 
merely  been  given  a  new  significance,  and  the  usual  way  of  expressing 
it  nowadays  is  by  means  of  a  supply  and  demand  curve,  which 
simply  involves  translating  Cournot's  dictum  into  figures. 

The  same  is  true  of  the  law  stating  that  cost  of  production 
determines  value.  There  is  the  same  petitio  principii  here.  It  is 
easy  enough  to  see,  on  the  contrary,  that  the  entrepreneur  regulates 
his  cost  of  production  according  to  price.  The  Classical  school 
had  realised  this  as  far  as  one  of  the  elements  in  the  cost  of  pro- 
duction was  concerned,  for  it  was  quite  emphatic  in  its  teaching 
that  price  determined  rent,  but  that  rent  did  not  determine  price. 
It  is  just  as  true  of  the  other  elements.  In  other  words,  the  second 
law  is  just  as  fallible  as  the  first.  It  is  obviously  imperative  that 
the  vain  quest  for  causal  relations  should  be  abandoned  and  that 
economists  should  be  content  with  the  statement  that  between 
cost  of  production  and  price  there  exists  a  kind  of  equilibrating 
action  in  virtue  not  of  any  mysterious  solidarity  which  subsists 
between  them,  but  because  the  mere  absence  of  equilibrium  due 
either  to  a  diminution  or  an  increase  in  the  quantity  of  products 
Immediately  sets  up  forces  which  tend  to  bring  it  back  to  a  position 
of  equilibrium.  This  interdependent  relation,  which  is  extremely 
important  in  itself  and  upon  which  the  Hedonists  lay  great  store, 
is  simply  one  example  taken  from  among  many  where  the  value 
of  one  thing  is  just  a  function  of  another. 

Similar  criticism  applies  to  the  law  of  distribution,  to  the 
Classical  doctrine  of  wages,  interest,  and  rent.  The  way  the  Classical 
writers  treated  of  these  questions  was  extraordinarily  naive.  Take 
the  question  of  rent.  You  just  subtract  from  the  total  value  of 
the  product  wages,  interest,  and  profit,  and  you  are  left  with 
rent.  Or  take  the  question  of  profit.  In  this  case  you  will  have 
to  subtract  rent,  if  there  is  any,  then  wages  and  interest,  the  other 
component  elements,  and  what  remains  is  profit.  Bohm-Bawerk 
wittily  remarks  that  the  saying  that  wages  are  determined  by  the 
product  of  labour  apparently  only  amounts  to  this — that  what 
remains  (if  any)  after  the  other  co-operators  have  had  their  share 
is  wages.  Each  co-partner  in  turn  becomes  a  residual  claimant 


521 

and  the  amount  of  the  residuum  is  determined  by  assuming  that 
we  already  know  the  share  of  the  other  claimants  ! l 

The  new  school  refuses  any  longer  to  pay  honour  to  this  ancient 
trinity.  It  is  impossible  to  treat  each  factor  separately  because  of 
the  intimate  connection  between  them,  and  their  productive  work, 
as  the  Hedonists  point  out,  must  necessarily  be  complementary. 
In  any  case,  before  we  can  determine  the  relative  shares  of  each 
we  must  be  certain  that  our  unknown  x  is  not  reckoned  among 
the  known.  This  naturally  leads  them  on  to  the  realm  of  mathe- 
matical formulae  and  equations. 

All  the  Hedonists,  however,  do  not  employ  mathematics.  The 
Psychological  school,  especially  the  Austrian  section  of  it,  seems  to 
think  that  little  can  be  gained  by  the  employment  of  mathematical 
formulae.  Some  of  the  Mathematical  economists,  on  the  other  hand, 
are  equally  convinced  of  the  futility  of  psychology,  especially  of 
the  famous  principle  of  final  utility,  which  is  the  corner-stone  of 
the  Austrian  theory.8 

For  the  sake  of  clearness  it  may  be  better  to  take  the  two  branches 
— the  Psychological  and  the  Mathematical — separately. 

II :    THE  PSYCHOLOGICAL  SCHOOL 

THE  feature  of  the  Psychological  school  is  its  fidelity  to  the  doctrine 
of  final  utility,  whatever  that  may  mean.3  The  older  economists 

1  Let  P  =  value  of  product  and  x,  y,  z  represent  wages,  interest,  and  rent 
respectively,  then  «  +  y  +  z  —  P,  which  is  insoluble. 

Nor  does  it  seem  much  more  hopeful  when  written  out  thus  : 

x  =  P  -  (y  +  z) 

y  =  P  -  (x  +  z) 

§  -  P  -  («  +  y) 

•  *'  The  theory  of  economic  equilibrium  is  quite  distinct  from  the  theory  of 
final  utility,  although  the  public  are  apt  to  confuse  them  and  to  think  that  they  are 
both  the  same."  (Vilfredo  Pareto,  ISEconomie  pure,  1902.) 

»  The  name  varies  a  little  with  different  authors  and  in  different  countries. 
"  The  final  degree  of  utility  "  is  the  term  used  by  Jevona,  "  marginal  utility  "  by 
the  Americans,  "  the  intensity  of  the  last  satisfied  want  "  by  Walras.  Walras 
also  speaks  of  it  as  "  scarcity,"  using  the  term  in  a  purely  subjective  fashion  to 
denote  insufficiency  for  present  need.  This  very  plethora  of  terms  suggest*  a 
certain  haziness  of  conception.  The  term  "marginal"  seems  clearer  than 
the  term  "  final,"  although  in  some  oases  it  may  be  impossible  to  oust  the 

latter. 

It  appears  that  the  first  suggestion  of  final  utility  in  the  senne  in  which  it  is 
employed  by  the  Psychological  school  is  due  to  a  French  engineer  of  the  name  of 
Dupuit.  He  threw  out  the  suggestion  in  two  memoirs  entitled  La  Meture  >de 
dei  Travaux  public*  (1844)  and  ISUtilitl  At*  Voiu  de  Communication 


522  THE  HEDONISTS 

had  got  hold  of  a  similar  notion  when  they  spoke  of  value  in  use, 
but  instead  of  preserving  the  idea  they  dismissed  it  with  a  name, 
and  it  was  left  to  the  Psychological  school  to  revive  it  in  its  present 
glorified  form. 

It  must  not  be  imagined  that  the  term  is  employed  in  the  usual 
popular  sense  of  something  beneficial.  All  that  it  connotes  is 
ability  to  satisfy  some  human  want,  be  that  want  reasonable, 
ridiculous,  or  reprobatory.  Bread,  diamonds,  and  opium  are  all 
equally  useful  in  this  sense.1 

Nor  must  we  fall  into  the  opposite  error  of  thinking  of  it  as 
the  utility  of  things  in  general.  Rather  is  it  the  utility  of  a  parti- 
cular unit  of  some  specific  commodity  relative  to  the  demand  of 
some  individual  for  that  commodity,  whether  the  individual  in 
question  be  producer  or  consumer.  It  is  not  a  question  of  bread 
in  general,  but  of  the  number  of  loaves.  To  speak  of  the  utility  of 
bread  in  general  is  absurd,  and,  moreover,  there  is  no  means  of 
measuring  it.  What  is  interesting  to  me  is  the  amount  of  bread 
which  I  want.  This  simple  change  in  the  general  point  of  view 

(1849),  both  of  which  were  published  in  the  Annales  des  Fonts  et  Chaussees, 
although  their  real  importance  was  not  realised  until  a  long  time  afterwards. 
Gossen  also,  whose  book  is  referred  to  on  p.  529,  was  one  of  the  earliest  to 
discover  it. 

In  its  present  form  it  was  first  expounded  by  Stanley  Jevons  in  his  Theory  of 
Political  Economy,  and  by  Karl  Menger  in  his  Grundsdtze  der  Volkswirtschaft- 
lehre  (1871).  Walras's  conception  of  scarcity,  which  is  just  a  parallel  idea,  was 
made  public  about  the  same  time  (1874).  Finally  Clark,  the  American  economist, 
in  his  Philosophy  of  Value,  which  is  of  a  somewhat  later  date  (1881),  seems  to 
have  arrived  at  a  similar  conclusion  by  an  entirely  different  method — a  remark- 
able example  of  simultaneous  discoveries,  which  are  by  no  means  rare  in  the 
history  of  thought. 

Despite  its  cosmopolitan  origin,  the  school  is  generally  spoken  of  as  the 
Austrian  school,  because  its  most  eminent  representatives  have  for  the  most 
part  been  Austrians.  Among  these  we  may  mention  Karl  Menger,  already 
referred  to,  Professor  Sax  (Das  Wesen  und  die  Aufgabe  der  Nationalokonomie, 
1884),  Wieser  (Der  naturliche  Werth,  1889),  and  of  course  Bohm-Bawerk 
(author  of  Orundzuge  der  Theorie  des  wirthschaftlichen  Qiiterwerths,  in  Jahr- 
bilcher  fur  Nationalokonomie,  1886,  and  the  well-known  book  on  capital  and 
interest). 

Lately,  however,  the  doctrine  seems  to  havj  changed  its  nationality  and 
become  wholly  American.  The  American  professors  J.  B.  Clark,  Patten,  Irving 
Fisher,  Carver,  Fetter,  etc.,  are  assiduous  students  of  marginal  utility,  apply- 
ing the  conception  not  only  to  problems  of  capital  and  interest,  but  also  to  the 
question  of  distribution. 

1  To  escape  the  confusion  which  would  result  from  employing  the  same  term 
in  two  such  very  different  senses — a  confusion  that  is  inevitable  however  one 
may  try  to  avoid  it — Pareto  has  substituted  the  word  "  ophelimity,"  and  Gide 
in  his  Principles  (1883)  "  desirability." 


THE  PSYCHOLOGICAL  SCHOOL  523 

has  effectively  got  rid  of  all  the  ambiguities  under  which  the  Classical 
school  laboured.1 

1.  The  first  problem  that  suggests  itself  in  this  connection  is 
this  :    Why  is  the  idea  of  value  inseparable  from  that  of  scarcity  ? 
Simply  because  the  utility  of  each  unit  depends  upon  the  intensity 
of  the  immediate  need  that  requires  satisfaction,  and  this  intensity 
itself  depends  upon  the  quantity  already  possessed,  for  it  is  a  law 
of  physiology  as  well  as  of  psychology  that  every  need  is  limited 
by  nature  and  grows  less  as  the  amount  possessed  increases,  until 
a  point  zero  is  reached.     This  point  is  called  the  point  of  satiety, 
and  beyond  it  the  degree  of  utility  becomes  negative  and  desire  is 
transformed  into  repulsion.2    Hence  the  first  condition  of  utility 
is  limitation  of  supply. 

So  long  as  people  held  to  the  idea  of  utility  in  general  it  was 
impossible  to  discover  any  necessary  connection  between  utility 
and  scarcity.  It  was  easy  enough  to  see  that  an  explanation  that 
was  not  based  upon  one  or  other  of  these  two  ideas  was  bound  to 
be  unsatisfactory,  but  nobody  knew  why.  As  soon  as  the  connec- 
tion between  the  two  was  realised,  however,  it  became  evident  that 
utility  must  be  regarded  as  a  function  of  the  quantity  possessed, 
and  that  this  degree  of  utility  constitutes  what  we  call  value. 

2.  Just  as  the  notion  of  final  utility  solved  one  of  the  most 
difficult  problems  in  economics,  namely,  why  water,  for  example, 
has  less  value  than  diamonds,  it  also  helped  to  clear  up  another 
mystery  that  had  perplexed  many  economists  from  the  Physiocrats 
downward,  namely,  how  exchange,  which  by  definition  implies  the 
equivalence  of  the  objects  exchanged,  can  result  in  a  gain  for  both 
parties.     Here  at  last  is  the  enigma  solved.     In  an  act  of  exchange 
attention  must   be  focused  not  upon  the  total  but  upon  the  final 

1  "  The  idea  of  final  utility  is  the  '  open  sesame,'  the  key  to  the  most  compli- 
cated phenomena  of  economic  life,    affording  a  solution  of  its  most  difficult 
problems."     (Bohm-Bawerk,  The  Austrian  Economists,  in  Annals  of  the  American 
Academy  of  Political  and  Social  Science,  1891.) 

2  Condillac  had  already  drawn  attention  to  this  fact  (see  p.  48),  and  Buffon 
had  noted  it  even  before  that.     "  The  poor  man's  coin  which  goes  to  pay  for  the 
necessaries  of  life  and  the  last  coin  that  goes  to  fill  the  financier's  purse  are  in 
the  opinion  of  the  mathematician  two  units  of  the  same  order,  but  to  the  moralist 
the  one  is  worth  a  louis,  the  other  not  a  cent."     (Esaai  d'Arithmetique  morale.) 

The  connection  between  quantity  and  demand  is  best  expressed  by  means  of 
a  curve  either  of  utility  or  of  demand  (see  p.  632).  Along  the  horizontal  line  let 
the  figures  1,  2,  3,  4  denote  the  quantities  consumed,  and  from  each  of  these 
points  draw  a  vertical  line  to  denote  the  intensity  of  demand  for  each  of  these 
quantities.  The  height  of  the  ordinate  decreases  more  or  less  rapidly  M  the 
quantity  increases,  until  at  last  it  falls  to  zero. 


524  THE  HEDONISTS 

utility.  The  equality  in  the  case  of  both  parties  lies  in  the  balance 
between  the  last  portion  that  is  acquired  and  the  last  portion  that 
is  given  up. 

Imagine  two  Congoese  merchants,  the  one,  A,  having  a  heap 
of  salt,  and  the  other,  B,  a  heap  of  rice,  which  they  are  anxious  to 
exchange.  As  yet  the  rate  of  exchange  is  undetermined,  but  let 
them  begin.  A  takes  a  handful  of  salt  and  passes  it  on  to  B,  who 
does  the  same  with  the  rice,  and  so  the  process  goes  on.  A  casts 
his  eye  upon  the  two  heaps  as  they  begin  mounting  up,  and  as  the 
heap  of  rice  keeps  growing  the  utility  of  each  new  handful  that  is 
added  keeps  diminishing,  because  he  will  soon  have  enough  to 
supply  all  his  wants.  It  is  otherwise  with  the  salt,  each  successive 
handful  assuming  an  increasing  utility.  Now,  seeing  that  the  utility 
of  the  one  keeps  increasing,  while  that  of  the  other  decreases, 
there  must  come  a  time  when  they  will  both  be  equal.  At  that 
point  A  will  stop.  The  rate  of  exchange  will  be  determined,  and 
the  prices  fixed  by  the  relative  measures  of  the  two  heaps.  At  that 
moment  the  heap  of  rice  acquired  will  not  have  for  A  a  much  greater 
utility  than  has  the  heap  of  salt  with  which  he  has  parted. 

But  A  is  not  the  only  individual  concerned,  and  it  is  not  at  all 
probable  that  B  will  feel  inclined  to  stop  at  the  same  moment  as  A  ; 
and  if  he  had  made  up  his  mind  to  stop  before  A  had  been  satisfied 
with  the  quantity  of  rice  given  him  no  exchange  would  have  been 
possible.  We  must  suppose,  then,  that  each  party  to  the  exchange 
must  be  ready  to  go  to  some  point  beyond  the  limit  which  the  other 
has  fixed  in  petto.  This  point  can  only  be  arrived  at  by  bargaining.1 

1  It  is  in  cases  of  this  kind  that  figures  become  handy.  If  we  take  two  curves, 
an  ascending  one  to  represent  the  utility  of  each  handful  of  salt  parted  with,  and 
a  descending  one  to  represent  the  utility  of  each  handful  of  rice  acquired,  the  two 
curves  must  necessarily  intersect,  seeing  that  one  is  just  the  inverse  of  the  other. 
The  point  of  intersection  marks  the  place  where  the  utilities  of  the  two  exchanged 
handf uls  are  exactly  equal. 

We  must  be  careful  not  to  confuse  matters,  however.  It  is  not  suggested  that 
the  final  utilities  in  the  case  of  the  two  co-exchangers  are  equal.  There  is  no 
common  measure  by  which  the  desires  of  different  persons  can  be  compared,  and 
no  bridge  from  one  to  the  other.  What  is  implied  is  that  the  final  utility  of  both 
commodities  for  the  same  person  are  the  same.  The  balance  lies  between  two 
preferences  of  the  same  individual.  The  actual  market  exchange  is  just  the 
resultant  of  all  these  virtual  exchanges. 

The  Austrian  chools  in  its  explanation  makes  use  of  a  hypothesis  known  as 
the  double  limit,  which  does  not  seem  to  be  absolutely  indispensable;  seeing  that 
other  economists  of  the  same  school — Walras,  for  example — appear  to  get  on  well 
enough  without  it.  They  seem  to  think  of  buyers  and  sellers  drawn  up  in  two 
rows  facing  one  another.  Every  one  of  the  sellers  attributes  to  the  object 
which  he  possesses  and  which  he  wants  to  sell  a  certain  utility  different  from  hia 


THE  PSYCHOLOGICAL  SCHOOL  525 

8.  Another  question  that  requires  answering  is  this  :  How  is  it 
that  there  is  only  one  price  for  goods  of  the  same  quality  in  the 
same  market  ?  Once  it  is  clearly  grasped  that  the  utility  spoken 
of  is  the  utility  of  each  separate  unit  for  each  separate  individual 
it  will  be  realised  that  there  must  be  as  many  different  utilities  as 
there  are  units,  for  each  of  them  satisfies  a  different  need.  But 
if  this  is  the  case,  why  does  a  person  who  is  famishing  not  pay  a 
much  higher  price  for  a  loaf  than  a  wealthy  person  who  has  very 
little  need  for  it  ?  or,  why  do  I  not  pay  more  when  I  am  hungry  than 
when  I  am  not  ?  The  reason  is  that  it  would  be  absurd  to  imagine 
that  goods  which  are  nearly  identical  and  even  interchangeable 
should  have  different  exchange  values  on  the  same  market  and 
especially  for  the  same  person.  This  law  of  indifference,1  as  it  is 
called,  is  derived  from  another  law  to  which  the  Psychological 
school  rightly  attaches  great  importance,  and  which  constitutes 
one  of  its  most  precious  contributions  to  the  study  of  economics, 
namely,  the  law  of  substitution.  This  law  implies  that  whenever 
one  commodity  can  be  exchanged  for  another  for  the  purpose  of 
satisfying  the  same  need,  the  commodity  replaced  cannot  be  much 
more  valuable  than  the  commodity  replacing  it.1 

For  what  is  substitution  but  mutual  exchange  ?    And  exchange 

neighbour's.  Each  buyer  in  the  same  way  attributes  to  that  object  which  he 
desires  to  buy  a  degree  of  utility  which  is  different  from  that  which  his  neighbour 
puts  upon  it.  The  first  exchange,  which  will  probably  have  the  effect  of  fixing 
the  price  for  all  the  other  buyers  and  sellers,  will  take  place  between  the  buyer 
who  attributes  the  greatest  utility  to  the  commodity  he  has  to  sell,  and  who  is 
therefore  least  compelled  to  sell,  and  the  buyer  who  attributes  the  least  utility  to 
the  commodity  he  wishes  to  buy  and  who  is  therefore  least  tempted  to  buy.  At 
first  sight  it  seems  impossible  that  the  party  as  a  whole  should  be  bound  by  the 
action  of  the  two  individuals  who  show  the  least  inclination  to  come  to  terms. 
It  would  be  more  natural  to  expect  the  first  move  to  take  place  between  the  seller 
who  is  forced  to  sell  and  because  of  his  urgency  is  content  with  a  price  of  10«. 
per  bushel,  say,  and  the  buyer  who  feels  the  strongest  desire  to  buy  and  who 
rather  than  go  without  would  be  willing  to  give  30«.  for  it.  But  upon  considera- 
tion it  will  be  found  that  the  price  is  indeterminate  just  because  these  two  are 
ready  to  treat  at  any  price.  The  most  impatient  individual  will  surely  wait  to 
see  what  terms  the  least  pressed  will  be  able  to  make,  and  it  is  only  natural  that 
those  who  are  nearest  one  another  should  be  the  first  to  come  together.  These 
two  co-exchangists  who  control  the  market  are  known  as  the  "  limiting  couple." 

1  It  was  Stanley  Jevons  who  gave  it  this  expressive  name.  It  is  meant  to 
imply  that  if  two  objects  which  fulfil  very  different  needs,  perhaps,  can  be  inter- 
changed, they  cannot  have  very  different  values. 

*  The  law  of  substitution  applies  not  merely  to  different  objects  which 
•atisfy  the  same  need,  but  also  to  objects  which  supply  different  needs,  provided 
those  needs  are  to  any  extent  interchangeable — to  tea  as  a  substitute  for  wines,  to 
coffee  as  a  substitute  for  both,  to  travel  as  a  substitute  for  the  life  of  a  country 
gentleman. 


52(5  THE  HEDONISTS 

implies  equality,  so  that  if  there  is  a  series  of  interchangeable  goods 
none  of  them  can  be  of  greater  value  than  any  of  the  rest. 

Consequently,  if  an  individual  has  at  his  disposal  100  glasses 
of  water,  which  is  easily  available  everywhere  except  in  the  Sahara, 
perhaps,  no  one  of  these  glasses,  not  even  that  one  for  which  he 
would  be  willing  to  give  its  weight  in  gold  were  he  very  thirsty  and 
that  the  only  glassful  available,  will  have  a  greater  value  than  has 
the  hundredth,  which  is  worth  exactly  nothing.  The  hundredth  is 
always  there  ready  to  be  substituted  for  any  of  the  others. 

But  the  best  way  of  getting  a  clear  idea  of  final  utility  is  not 
to  consider  the  value  of  the  object  A,  but  of  the  object  B,  which 
can  replace  it.  It  becomes  evident,  then,  that  if  I  am  about  to  lose 
some  object,  A,  which  I  value  a  good  deal  but  which  can  be  per- 
fectly replaced  by  another  object,  B,  that  object  A  cannot  be  much 
more  valuable  than  B  ;  and  if  I  had  the  further  choice  of  replacing 
it  by  C,  C  being  less  valuable  than  B,  then  A  itself  cannot  be  much 
more  valuable  than  C.1 

We  arrive,  then,  at  this  conclusion :  The  value  of  wealth  of  every 
kind  is  determined  by  the  value  of  its  least  useful  portion — that  is, 
by  the  least  satisfaction  which  any  one  portion  of  it  can  give. 

Hitherto  we  have  been  concerned  with  the  notion  of  final  utility 
as  applied  to  the  problems  of  value  and  exchange,  but  has  it  the 
same  effect  when  applied  to  problems  of  production,  distribution, 
or  consumption  ?  The  Hedonists  have  no  doubt  as  to  the  answer, 
for  what  are  production,  distribution,  and  consumption  but 
modifications  of  exchange  ? 

Take  production,  for  example.  How  is  it  that  under  a  system  of 
free  competition  the  value  of  the  product  is  regulated  by  its  cost 
of  production  ?  It  is  because  a  competitive  regime  is  by  every 
definition  a  regime  where  at  any  moment  one  product  may  be 
exchanged  for  another  of  a  similar  character,  the  similarity  in  this 
case  being  simply  the  result  of  a  certain  transformation  of  the  raw 
material.  The  law  of  substitution  is  operative  here,  and  the  reason 
why  cost  of  production  regulates  value  is  that  the  cost  of  production 
at  any  moment  represents  the  last  interchangeable  value. 

The  same  is  true  of  consumption,  as  we  can  see  if  we  only  watch 
the  way  in  which  each  of  us  distributes  his  purchases  and  arranges 
his  expenditure.  There  is  evident  everywhere  an  attempt  to  get 

1  "  The  enjoyment  derived  from  the  least  enjoyable  unit  is  what  we  under- 
stand by  final  utility."  (Bohm-Bawerk,  The  Austrian  Economists,  in  the  Annals 
of  the  American  Academy  of  Political  and  Social  Science,  1891.) 


THE  PSYCHOLOGICAL  SCHOOL  527 

the  best  out  of  life — to  get  all  the  enjoyment  which  our  different 
incomes  may  be  made  to  yield ;  here  spending  more  on  house-room 
and  less  on  food,  there  curtailing  on  amusement  and  extending  on 
charity,  until  a  rough  kind  of  equilibrium  is  reached  where  the  final 
utility  of  the  last  exchanged  objects— or,  if  another  phrase  be 
preferred,  the  intensities  of  the  last  satisfied  needs — are  equal.  If 
the  coin  spent  in  purchasing  the  last  cigar  does  not  yield  the  same 
pleasure  as  the  same  coin  yields  when  spent  on  a  newspaper,  the 
newspaper  will  in  future  probably  take  the  place  of  the  cigar. 
Consumption  seems  really  to  be  a  kind  of  exchange,  with  conscience 
for  mart  and  desires  as  buyers  and  sellers.1 

Nor  is  the  realm  of  distribution  even  beyond  the  reach  of  the 
utility  theory.  Its  application  to  the  problems  of  interest,  wages, 
and  rent  is  largely  the  work  of  American  economists,  especially  of 
J.  B.  Clark.  It  is  quite  impossible  for  us  to  give  an  exposition  of 
the  subtle  analyses  in  which  the  quarterly  reviews  of  the  American 
universities  take  such  a  delight,  and  which  undoubtedly  afford  a 
very  welcome  relaxation  in  an  atmosphere  so  charged  with  prag- 
matism and  realism.  But  we  must  just  glance  at  the  theory  of 
wages.  Wages,  like  other  values,  must  be  determined  by  final 
utility.  But  the  final  utility  of  what,  and  for  whom  ?  The  final 
utility  of  the  services  which  the  worker  renders  to  the  entrepreneur. 
Following  other  factors  of  production,  the  final  productivity  of  the 
workers  will  determine  their  wages.  That  is,  their  final  utility 
is  fixed  by  the  value  produced  by  the  marginal  worker — no  matter 
how  worthless  he  may  be — who  only  just  pays  the  entrepreneur. 
The  value  produced  by  this  almost  supernumerary  worker  not  only 
fixes  the  maximum  which  the  employer  can  afford  to  give  him, 

1  The  new  school  deduces  a  very  curious  conclusion  from  this  law  of 
indifference.  Although  there  is  only  one  price  for  all  corn  buyers,  say,  the 
final  utility  of  the  corn  for  each  individual  is  by  no  means  the  same.  Let  us 
assume  that  the  price  is  20*.,  but  one  of  the  buyers,  rather  than  go  without,  would 
possibly  have  given  25s.  for  it,  and  others  might  have  been  willing  to  give  24*. ,  23«. , 
22s.,  etc.  Every  one  of  those  who  ex  hypothesi  only  pay  20s.  gains  a  surplus  which 
Professor  Marshall  has  called  consumer's  rent  (Principles,  Book  III,  chap.  6). 
He  has  given  it  that  name  in  order  to  facilitate  comparison  with  producer's 
rent,  which  had  gained  notoriety  long  before  the  Hedonistic  school  arose.  Both 
are  due  to  similar  causes,  namely,  the  existence  of  differential  advantages 
which  give  rise  to  a  substantial  margin  between  the  selling  price  and  the  cost  of 
production. 

Really,  however,  the  similarity  is  simply  a  matter  of  words,  because  consumer's 
rent  is  purely  subjective,  whereas  producer's  rent  is  a  marketable  commodity. 
It  would  be  better  to  say  simply  that  in  many  cases  of  exchange  it  is  not  correct 
to  argue  that  because  the  prices  are  equal  the  satisfaction  given  to  different 
persons  is  necessarily  equal. 


528  THE  HEDONISTS 

but  also  the  wages  given  to  all  the  other  workers  who  can  take  his 
place,  i.e.  who  are  employed  upon  the  same  kind  of  work  as  his, 
although  they  may  produce  much  more  than  he  does  ;  just  as  in  the 
case  of  the  100  glasses  of  water  the  least  valuable  glassful  deter- 
mines the  value  of  all  the  rest.1 

Thus  is  the  productivity  theory  of  wages  at  once  confirmed  and 
corrected.  But  this  time  it  is  the  productivity  of  the  least  pro- 
ductive worker,  of  the  individual  who  barely  keeps  himself.  No 
wonder  the  theory  has  lost  its  optimistic  note.  Somehow  or  other 
it  does  not  seem  very  different  from  the  old  "  brazen  law." 

The  rate  of  interest  follows  a  similar  line — the  marginal  item  of 
capital  fixing  the  rate.  It  is  even  more  true  of  capital,  which  is 
more  completely  standardised,  with  the  result  that  the  principle  of 
substitution  works  much  more  easily.2 

Rent  is  treated  at  greater  length  in  the  next  chapter. 

Gradually  we  begin  to  realise  how  the  observation  of  certain  facts 
apparently  of  a  worthless  or  insignificant  character,  such  as  the 
substitution  of  chicory  for  coffee  or  the  complete  uselessness  of  a 
single  glove,  enabled  the  Psychological  school  to  propound  a  number 
of  general  theories  such  as  the  law  of  substitution  and  the  doctrine 
of  complementary  goods  which  shed  new  light  upon  a  great  number 
of  economic  questions.  There  is  something  very  impressive  about 
this  deductive  process  that  irresistibly  reminds  one  of  the  genie  of 
the  Thousand  and  One  Nights,  who  grew  gradually  bigger  and 
bigger  until  he  finally  reached  the  heavens.  But  then  the  genie 
was  nothing  but  flame.  It  still  remains  to  be  seen  whether  this  is 
equally  true  of  the  Hedonistic  theories. 


Ill :   THE  MATHEMATICAL  SCHOOL  » 

THE  Mathematical  school  is  distinguished  for  its  attachment  to 
the  study  of  exchange,  from  which  It  proposes  to  deduce  the  whole 
of  political  economy.  Its  method  is  based  upon  the  fact  that 

1  It  is  scarcely  necessary  to  point  out  that  if  workers  are  not  really  inter- 
changeable on  account  of  their  different  capacities  the  law  can  no  longer  be  said 
to  hold  good,  since  it  always  presupposes  free  competition,  whereas  in  this  case  we 
have  a  personal  monopoly. 

1  It  is  not  quite  the  same  when  the  capital  is  fixed,  for  the  law  of  substitution 
is  no  longer  applicable  in  that  case,  and  the  incomes  are  very  different. 

1  It  must  not  be  supposed  that  in  applying  the  term  "  school  "  to  these 
writers  we  wish  to  suggest  that  they  have  a  common  programme.  All  we  mean 
is  that  they  make  use  of  the  same  method. 

It  is  generally  recognised  to-day  that  the  school  dates  from  the  appearance 


THE  MATHEMATICAL  SCHOOL  529 

every  exchange  may  be  represented  as  an  equation,  A  =  B,  which 
expresses  the  relation  between  the  quantities  exchanged.  Thus  the 
first  step  plunges  us  into  mathematics. 

However  true  this  may  be,  the  application  of  the  method  must 
necessarily  be  very  limited  if  it  is  always  to  be  confined  to  exchange. 
It  is,  however,  a  mistake  to  suppose  that  this  is  really  the  case,  and 
one  of  the  most  ingenious  and  fruitful  contributions  made  by  the  new 
school  was  to  show  how  this  circle  could  be  gradually  enlarged  so  as 
to  include  the  whole  of  economic  science. 

Distribution,  production,  and  even  consumption  are  included 
within  its  ambit.  Let  us  take  distribution  first  and  inquire  what 
wages  and  rent  are.  In  a  word,  what  are  revenues  ?  A  revenue  is 
the  price  of  certain  services  rendered  by  labour,  capital,  and  land, 

of  Cournot's  Recherches  aur  Us  Principe*  mathematiques  de  la  TMorie  des  Richestet 
(1838).  Cournot,  who  was  a  school  inspector,  died  in  1877,  leaving  behind 
him  several  philosophical  works  which  are  now  considered  to  be  of  some 
importance.  The  story  of  his  economic  work  affords  an  illustration  of  the 
kind  of  misfortune  which  awaits  a  person  who  is  in  advance  of  his  age.  For 
several  years  not  a  single  copy  of  the  book  was  sold.  In  1863  the  author  tried 
to  overcome  the  indifference  of  the  public  by  recasting  the  work  and  omitting 
the  algebraical  formulae.  This  time  the  book  was  called  Principcs  de  la  Thiorie 
des  Richesses.  In  1876  he  published  it  again  in  a  still  more  elementary  form, 
and  under  the  title  of  Revue  sommaire  des  Doctrines  cconomiques,  but  with 
the  same  result.  It  was  only  shortly  before  his  death  that  attention  was 
drawn  to  the  merits  of  the  work  in  a  glowing  tribute  which  was  paid  to  him  by 
Stanley  Jevons. 

Gossen's  book,  Entwickelung  der  Oesetze  des  menschlichen  Verkehrs,  which 
appeared  much  later  (1853),  was  equally  unfortunate.  The  author  remained  an 
obscure  civil  servant  all  his  life.  His  book,  of  which  there  is  still  a  copy  in 
the  British  Museum — the  only  one  in  existence  possibly — was  accidentally 
discovered  by  Professor  Adamson,  and  Stanley  Jevons  was  again  the  first  to 
recognise  its  merits.  A  brief  resume  of  the  work  will  be  found  in  our  chapter 
on  Rent. 

Stanley  Jevons  (died  1882)  belongs  both  to  the  Mathematical  and  to  the  Final 
Utility  school.  His  charming  book,  The  Theory  of  Political  Economy,  dates  from 
1871. 

Leon  Walras,  who  is  persistently  spoken  of  as  a  Swiss  economist  just  because 
he  happened  to  spend  the  greater  part  of  his  life  at  the  University  of  Lausanne, 
also  known  as  the  School  of  Lausanne,  was  in  reality  a  Frenchman.  His  Elements 
d'Economie  politique  pure,  of  which  the  first  part  appeared  in  1874,  contains  a  full 
exposition  of  Mathematical  economics. 

To  day  the  Mathematical  method  can  claim  representatives  in  every  country  : 
Marshall  and  Edgeworth  in  England,  Launhardt,  Auspitz,  and  Lieben  in  Germany, 
Vilfredo  Pareto  and  Barone  in  Italy,  Irving  Fisher  in  the  United  States,  and 
Bortkevitch  in  Russia.  France,  however,  the  country  of  Cournot  and  Walras, 
has  no  Mathematical  economists,  unless  we  mention  Aupetit,  whose  work,  Thiorie 
de  la  Monnaie,  although  dealing  with  a  special  subject,  contains  a  general 
introduction. 


530  THE  HEDONISTS 

the  agents  of  production,  and  paid  for  by  the  entrepreneur  as  the 
result  of  an  act  of  exchange. 

And  what  is  production  ?  It  is  but  the  exchanging  of  one 
utility  for  another — a  certain  quantity  of  raw  materials  and  of 
labour  for  a  certain  quantity  of  consumable  goods.  Even  nature 
might  be  compared  to  a  merchant  exchanging  products  for  labour, 
and  Xenophon  must  have  had  a  glimpse  of  this  ingenious  theory 
when  he  declared  that  **  the  gods  sell  us  goods  in  return  for  our 
toil."  The  analogy  might  be  pushed  still  farther,  and  every  act  of 
exchange  may  be  considered  an  act  of  production.  Pantaleoni  puts 
it  elegantly  when  he  says  that  "  a  partner  to  an  exchange  is 
very  much  like  a  field  that  needs  tilling  or  a  mine  that  requires 
exploiting."  1 

And  what  are  capitalisation,  investment,  and  loan  but  the 
exchange  of  present  goods  and  immediate  joys  for  the  goods  and 
enjoyments  of  the  future  ? 

It  was  a  comparison  instituted  between  the  lending  of  money 
and  an  ordinary  act  of  exchange  that  led  Bohm-Bawerk  to  formulate 
his  celebrated  theory  of  interest.  Bohm-Bawerk,  however,  is  a  repre- 
sentative of  the  Austrian  rather  than  the  Mathematical  school. 

Even  consumption — that  is,  the  employment  of  wealth — implies 
incessant  exchanging,  for  if  our  resources  are  necessarily  limited 
that  must  involve  a  choice  between  the  object  which  we  buy  and 
that  which  with  a  sigh  we  are  obliged  to  renounce.  To  give  up  an 
evening  at  the  theatre  in  order  to  buy  a  book  is  to  exchange  one 
pleasure  for  another,  and  the  law  of  exchange  covers  this  case  just 
as  well  as  any  other.2  It  is  the  same  everywhere.  To  pay  taxes  is  to 
give  up  a  portion  of  our  goods  in  order  to  obtain  security  for  all 
the  rest.  The  rearing  of  children  involves  the  sacrifice  of  one's  own 
well-being  and  comfort  in  exchange  for  the  joys  of  family  life  and 
the  good  opinion  of  our  fellow-men. 

It  is  not  impossible,  then,  to  discover  among  economic  facts 

1  Des  Differences  d'Opinion  entre  Sconomistea  (Geneva,  1897),  inserted  in  Scritti 
varii  di  Economia,  pp.  1-48  (1904). 

2  Value  itself,  the  pivot  of  Classical  economics,  is  simply  a  link  in  exchange  with 
the  new  school,  and  thus  it  loses  all  its  subjectivity ;  and  since  it  is  not  a  thing  at 
all,  but  merely  an  expression,  it  would  be  ridiculous  to  struggle  to  find  its  cause, 
foundation,  or  nature,  as  the  older  writers  did.     This  is  why  Jevons  proposed  to 
banish  the  word  altogether  and  to  employ  the  term  "  ratio  of  exchange  "  instead. 
And  Aupetit  insists  that  "  the  expression  '  value '  is  to-day  devoid  of  content  .  .  . 
and  seems  doomed  to  disappear  from  the  scientific  vocabulary  altogether.     There 
is   no  great   harm  in  omitting  this  parasitical  element  as  we  have  done,  and 
in  treating  economic  equilibrium  as  an  entity  without  ever  employing  the  ten? 
•  value.'  "     (Thtorie  dt  la  Monnaie,  p.  85.) 


THE  MATHEMATICAL  SCHOOL  581 

certain  relations  which  are  expressible  in  algebraical  formulae  or 
even  reducible  to  figures.  The  art  of  the  Mathematical  economist 
consists  in  the  discovery  of  such  relations  and  in  putting  them  forth 
in  the  form  of  equations. 

For  example,  we  know  that  when  the  price  of  a  commodity  goes 
up  the  demand  for  it  falls  off.  Here  are  two  quantities,  one  of 
which  is  a  function  of  the  other.1  Let  us  see  how  the  law  of  demand 
in  its  amended  form  would  express  this. 

If  along  a  horizontal  line  A  B  we  take  a  number  of  fixed  points 
equidistant  from  one  another  to  represent  prices,  e.g.  1, 2,  3,  4,  5  . .  10, 
and  from  each  of  these  points  we  draw  a  vertical  line  to  represent 
the  quantity  demanded  at  that  price,  and  then  join  the  summits  of 
these  vertical  lines,  which  are  known  as  the  ordinates,  we  have  a 
curve  starting  at  a  fairly  high  point — representing  the  lowest  prices 
— and  gradually  descending  as  the  prices  rise  until  it  becomes 
merged  with  the  horizontal,  at  which  point  the  demand  becomes  nil.* 

What  is  very  interesting  is  that  the  curve  is  different  for  different 
products.  In  some  cases  the  curve  is  gentle,  in  others  abrupt, 
according  as  the  demand,  as  Marshall  puts  it,  has  a  greater  or  lesser 
degree  of  elasticity.  Every  commodity  has,  so  to  speak,  its  own 
characteristic  curve,  enabling  us,  at  least  theoretically,  to  recognise 
that  product  among  a  hundred.3 

1  If  demand  be  represented  by  d  and  price  by  p,  then  d  =-/  (p) ;  i.e.  demand  is 
a  function  of  price. 

Geometrical  figure*  can  always  take  the  place  of  equations,  for  every 
equation  can  be  expressed  in  the  form  of  a  curve.  Geometrical  representation 
makes  a  quicker  appeal  to  the  eye,  and  it  is  extremely  useful  where  people 
are  not  conversant  with  the  calculus  which  is  frequently  employed  by  Cournot 
and  other  Mathematical  writers.  But  it  is  hardly  as  fruitful,  for  a  geometrical 
figure  can  only  trace  the  relation  between  two  quantities,  one  of  which  is 
fixed  and  the  other  is  variable,  or  between  three  at  most,  when  two  would  be 
variable.  Even  in  this  case  recourse  would  be  necessary  to  projections,  and  the 
figures  in  that  case  would  not  be  very  clear.  In  the  case  of  algebraical  formulae, 
on  the  other  hand,  we  can  have  as  much  variation  as  we  like  provided  we  have  as 
many  equations  as  there  are  variables. 

*  Dupuit,  the  engineer,  was  the  first  to  make  use  of  a  demand  curre. 
Cournot,  who  refers  to  it  as  the  law  of  sale,  gives  an  admirable  illustra- 
tion of  its  operation  in  the  case  of  bottles  of  medicinal  waters  of  wonderful 
curative  power.  At  a  very  low  price  the  demand  and  consequently  the  sale 
would  be  very  great,  though  not  infinite  because  of  the  limit  which  exists 
for  each  want.  At  a  very  high  price  it  would  be  nil.  Between  the  two  extreme* 
would  be  several  intermediate  curves.  We  cannot  deal  with  all  the  ingenious 
deductions  which  Cournot  makes  concerning  monopoly  and  the  greater  or  leuer 
discord  between  monopoly  and  the  genera!  interest. 

1  The  demand  curve  is  generally  concave,  and  this  characteristic  form  if 
juat  the  geometrical  expression  of  the  well-known  fact  that  when  prices  are  low 


532 


THE  HEDONISTS 


We  would  naturally  expect  the  supply  curve  to  be  just  the 
inverse  of  the  demand  curve,  rising  with  a  rising  price  and  descending 
with  a  falling  one,  so  that  by  the  time  the  price  is  zero  supply  is  nil, 
whereas  the  demand  is  infinite.1 

enough  to  be  accessible  to  everybody  the  sales  increase  rapidly,  because  lean 
purses  being  much  more  numerous  than  fat  ones  a  slight  lowering  of  the  level  of 
prices  will  bring  the  commodity  within  the  reach  of  a  fresh  stratum  of  people.  It 
may  take  different  forms,  however.  For  some  products,  such  as  common  salt,  a 
considerable  fall  in  the  price  will  not  result  in  a  large  increase  in  the  sales.  In 
the  case  of  diamonds  a  great  fall  in  price  may  cause  a  falling  off  in  demand  because 
they  hare  become  too  cheap.  The  supply  curve,  on  the  other  hand,  is  generally 
convex,  because  the  supply,  which  only  enters  upon  the  scene  at  a  certain  point, 
is  very  sensible  to  price  movements,  going  up  rapidly  with  a  slight  increase  in 
price.  Its  upward  trend  is  soon  arrested,  however,  because  production  cannot 
keep  up  the  pace.  It  is  even  possible  that  the  supply  may  fall  off  at  the 
next  point,  for  the  simple  reason  that  there  is  no  more  of  the  commodity 
available. 

1  Below  on  the  same  diagram  is  traced  a  demand  and  a  supply  curve. 


The  figures  along  the  horizontal  line  denote  price,  along  the  vertical  the 
quantity  demanded.  In  the  given  figure  when  price  is  1,  quantity  demanded  is 
VI,  and  with  the  price  at  7  the  quantity  demanded  falls  to  zero. 

The  dotted  curve  represents  the  supply.  When  price  is  1,  supply  is  nil. 
When  price  is  10,  supply  mounts  up  to  IV.  Exchange  obviously  must  take 
place  just  where  demand  and  supply  are  equal,  i.e.  at  b,  which  marks  the  point 
of  intersection  of  the  two  lines,  when  the  amount  demanded  is  equal  to  the 
quantity  offered  and  the  price  is  6. 

The  vertical  lines  are  called  ordinatcs,  and  0  X  the  axis  of  the  ordinates. 
Distances  along  0  X  are  called  abscissae.  Each  point  on  the  curve  simply  marks 
the  intersection  of  these,  of  the  ordinates  and  the  abscissae.  This  is  true  of  the 


THE  MATHEMATICAL  SCHOOL  533 

But  it  is  not  quite  correct  to  regard  it  as  merely  the  inverse  of 
the  demand  curve.  A  supply  curve  is  really  a  much  more 
complicated  affair,  because  supply  itself  depends  upon  cost  of 
production,  and  there  are  some  kinds  of  production — agriculture, 
for  example — where  the  cost  of  production  increases  much  more 
rapidly  than  the  quantity  produced.  In  industry,  on  the  other 
hand,  the  cost  of  production  decreases  as  the  quantity  produced 
increases. 

Mathematical  political  economy,  not  content  with  seeking 
relations  of  mutual  dependence  between  isolated  facts,  claims  to  be 
able  to  embrace  the  whole  field  within  its  comprehensive  formulae. 
Everything  seems  to  be  in  a  state  of  equilibrium,  and  any  attempt 
to  upset  it  is  immediately  corrected  by  a  tendency  to  re-establish  it.1 
To  determine  the  conditions  of  equilibrium  is  the  one  object  of 
pure  economics. 

The  most  remarkable  attempt  at  systematisation  of  this  kind 
was  made  by  Professor  Walras,  who  endeavoured  to  bring  every 
aspect  of  the  economic  world  within  his  formula,  a  task  almost 
as  formidable  as  that  attempted  by  Laplace  in  his  Mtcanique 
celeste.2 

Let  us  imagine  the  whole  of  society  included  within  one  single 
room,  say  the  London  Stock  Exchange,  which  is  full  of  the  tumult 
of  those  who  have  come  to  buy  and  sell,  and  who  keep  shouting 
their  prices.  In  the  centre,  occupying  the  place  usually  taken  up 
by  the  market,  sits  the  entrepreneur,  a  merchant  or  manufacturer 
or  an  agriculturist,  as  the  case  may  be,  who  performs  a  double 
function. 

On  the  one  hand  he  buys  from  producers,  whether  rural  or  urban, 
landlords,  capitalists,  orworkers,  what  Walras  calls  their  "productive 

point  a,  for  example,  where  the  perpendicular  denotes  the  price  (1 )  and  the  other 
line  the  number  of  units  sold,  in  this  case  VI. 

Though  in  the  diagram  we  have  considered  the  ordinates  to  represent  price 
and  the  abscissae  quantities,  the  reverse  notation  would  work  equally  well. 

1  Mathematical  economics  also  studies  other  forms  of  equilibrium  which  are 
much  more  complicated  and  not  quite  so  important  perhaps,  relating  as  they  do 
to  conditions  of  unstable  equilibrium. 

1  Note  Pareto's  terms  of  appreciation  (Economic  pure,  1902,  p.  11) :  "  Walras 
was  the  first  to  show  the  importance  of  these  equations,  especially  in  the 
case  of  free  competition.  This  capital  discovery  entitles  him  to  all  the  praise 
that  we  can  give  him.  The  science  has  developed  a  good  deal  since  then,  and 
will  undoubtedly  develop  still  more  in  the  future,  but  that  will  not  take  away  from 
the  importance  of  Walras's  discovery.  Astronomy  has  progressed  very  con- 
siderably since  Newton  published  his  Principia,  but  far  from  detracting  from 
the  merits  of  the  earlier  work  it  has  rather  enhanced  ite  reputation." 


534  THE  HEDONISTS 

services,"  that  is,  the  fertility  of  their  lands,  the  productivity  of  their 
capital  or  their  labour  force,  and  by  paying  them  the  price  fixed  by 
the  laws  of  exchange  he  determines  the  revenue  of  each ;  to  the 
proprietor  he  pays  a  rent,  to  the  capitalist  interest,  to  the  workman 
wages.  But  how  is  that  price  determined  ?  Just  as  at  the  Exchange 
all  values  whatsoever  are  determined  by  the  law  of  demand  and 
supply,  so  the  entrepreneur  demands  so  many  services  at  such  and 
such  a  price  and  the  capitalist  or  workman  offers  him  so  many  at 
that  price,  and  the  price  will  rise  or  fall  until  the  quantity  of  services 
offered  is  equal  to  the  quantity  demanded. 

The  entrepreneur  on  his  side  disposes  of  the  manufactured  goods 
fashioned  in  his  factory  or  the  agricultural  products  grown  on  his 
farm  to  those  very  same  persons,  who  have  merely  changed  their 
clothes  and  become  consumers.  As  a  matter  of  fact  the  proprietors, 
capitalists,  and  workers  who  formerly  figured  as  the  vendors  of 
services  now  reappear  as  the  buyers  of  goods.  And  who  else  did  we 
expect  the  buyers  to  be  ?  Who  else  could  they  be  ? 

And  in  this  market  the  prices  of  products  are  determined  in  just 
the  same  fashion  as  we  have  outlined  above. 

All  at  once,  however,  a  newer  and  a  grander  aspect  of  the 
equilibrium  comes  to  view.  Is  it  not  quite  evident  that  the  total 
value  of  the  productive  services  on  the  one  hand  and  the  total  value 
of  the  products  on  the  other  must  be  mathematically  equal  ?  The 
entrepreneur  cannot  possibly  receive  in  payment  for  the  goods 
which  he  has  sold  to  the  consumers  more  than  he  gave  to  the  same 
persons,  who  were  just  now  producers,  in  return  for  their  services. 
For  where  could  they  possibly  get  more  money  ?  It  is  a  closed 
circuit,  the  quantity  that  comes  out  through  one  outlet  re-enters 
through  another. 

With  the  important  difference  that  it  keeps  much  closer  to  facts, 
the  explanation  bears  a  striking  resemblance  to  Quesnay's  Tableau 
tconomique.1 

1  If  this  is  to  be  taken  as  literally  true,  we  have  this  curious  result :  the 
entrepreneur,  receiving  for  the  products  which  he  sells  just  exactly  what  he  paid 
foi  producing  them,  makes  no  profit  at  all. 

Both  Walras  and  Pareto  fully  admit  the  paradoxical  nature  of  the  statement. 
Of  course  it  is  understood  that  it  can  only  happen  under  a  regime  of  perfectly 
free  competition,  care  being  also  taken  to  distinguish  between  profits  and  in- 
terest, a  thing  that  is  never  done,  apparently,  by  English  economists,  who  treat 
both  interest  and  profit  as  constituent  elements  of  cost  of  production. 

But  this  is  not  so  wonderful  as  it  seems  at  first  sight.  It  simply  means  a 
return  to  the  well-known  formula  that  under  a  regime  of  free  competition  selling 
price  must  necessarily  coincide  with  cost  of  production. 

This  does  not  prevent  our  recognising  the  existence  of  actual  profits.    Profit! 


THE  MATHEMATICAL  SCHOOL  585 

We  have  two  markets  in  juxtaposition,1  the  one  for  services  and 
the  other  for  products,  and  in  each  of  them  prices  are  determined  by 
the  same  laws,  which  are  three  in  number: 

(a)  On  the  same  market  there  can  be  only  one  price  for  the  same 
class  of  goods. 

(6)  This  price  must  be  such  that  the  quantity  offered  and  the 
quantity  demanded  shall  exactly  coincide. 

(c)  The  price  must  be  such  as  will  give  maximum  satisfaction  to 
the  maximum  number  of  buyers  and  sellers. 

All  these  laws  are  mathematical  in  character  and  involve  problems 
of  equilibrium. 

In  some  such  way  would  the  new  school  reduce  the  science  of 
economics  to  a  sort  of  mechanism  of  exchange,  basing  its  justifica- 
tion upon  the  contention  that  the  Hedonistic  principle  of  obtaining 
the  maximum  of  satisfaction  at  the  minimum  discomfort  is  a  purely 
mechanical  principle,  which  in  other  connections  is  known  as  the 

are  to  be  regarded  as  the  result  of  incessant  oscillations  of  a  system  round  some 
fired  point  with  which  it  never  has  the  good  fortune  actually  to  coincide.  Accord- 
ing to  this  conception  they  are  but  the  waves  of  the  sea.  But  the  existence  of 
waves  is  no  reason  for  denying  a  mean  level  of  the  ocean  or  for  not  taking  that 
mean  level  as  a  basis  for  measuring  other  heights.  Some  day,  perhaps,  equilibrium 
will  become  a  fact,  and  profits  will  vanish.  But  if  that  day  ever  does  dawn 
either  upon  the  physical  or  the  economic  world,  all  activity  will  suddenly  cease, 
and  the  world  itself  will  come  to  a  standstill. 

1  A  full  exposition  of  Walras's  system  involves  the  supposition  not  only  of 
two  but  of  three  markets  interwoven  together.  On  the  actual  market  where 
goods  are  exchanged  the  quantity  of  these  commodities  depends  upon  the 
quantity  of  productive  services,  land,  capital,  and  labour,  and  the  quantity  of  these 
productive  services,  at  least  the  quantity  of  capital,  depends  to  a  certain  extent 
upon  the  creation  of  new  capital,  which  in  turn  depends  upon  the  amount  of 
saving.  The  third  market,  then,  is  that  of  capitalisation.  Since  the  new  capital 
can  only  be  paid  for  out  of  savings,  i.e.  out  of  that  part  of  the  revenue  which 
has  been  employed  in  other  ways  than  in  buying  consumable  commodities,  the  price 
of  capital  must  be  such  as  to  equal  the  quantity  saved  and  the  quantity  of  new 
capital  demanded.  If  saving  exceeds  the  demand  the  price  will  fall,  etc. 

To  say  that  the  price  of  capital  has  gone  up  is  to  say  that  the  rate  of  interest 
or  the  reward  of  saving  has  fallen.  But  a  fall  in  the  rate  of  interest  will  check 
saving.  The  result  will  be  a  change  of  equilibrium,  the  price  of  new  capital 
will  fall,  the  rate  of  interest  will  go  up,  etc. 

Briefly,  then,  the  total  maximum  utilities  on  the  one  hand  and  the  price  on 
the  other,  these  are  the  two  conditions  determining  equilibrium  in  the  economic 
world,  no  matter  whether  it  be  products  or  services  or  capital.  "  The  same 
thing  in  true  of  gravity  in  the  physical  world,  which  varies  directly  with  the 
mass  and  inversely  with  the  square  of  the  distance.  Such  is  the  twofold  condi- 
tion which  determines  the  movement  of  the  celestial  bodies.  ...  In  both 
cases  the  whole  science  may  be  represented  by  a  formula  consisting  of  only  two 
lines.  Such  a  formula  will  include  a  great  number  of  facto,"  (Walras,  Sconomu 
politique  pure,  p.  306.) 


536  THE  HEDONISTS 

principle  of  least  resistance  or  the  law  of  conservation  of  energy. 
Every  individual  is  regarded  simply  as  the  slave  of  self-interest,  just  as 
the  billiard-ball  is  of  the  cue.  It  is  the  delight  of  every  economist 
as  of  every  good  billiard-player  to  study  the  complicated  figures 
which  result  from  the  collision  of  the  balls  with  one  another  or  with 
the  cushion.1 

Another  problem  of  equilibrium  is  to  discover  the  exact  propor- 
tion in  which  the  different  elements  combine  in  production.  Jevons 
compares  production  to  the  infernal  mixture  which  was  boiled  in 
their  cauldron  by  the  witches  in  Macbeth.  But  the  ingredients  are 
not  mixed  haphazard,  and  Pareto  thinks  that  they  conform  to  a  law 
analogous  to  the  law  known  in  chemistry  as  the  law  of  definite 
proportions,  which  determines  that  molecules  shall  combine  in  certain 
proportions  only.  The  combination  of  the  productive  factors  is 
perhaps  not  quite  so  rigidly  fixed  as  is  the  proportion  of  hydrogen 
and  oxygen  which  goes  to  form  water.  Similar  results,  for  example, 
may  be  obtained  by  employing  more  hand  labour  and  less  capital,  or 
more  capital  and  less  hand  labour.  But  there  must  be  some  certain 
proportion  which  will  yield  a  maximum  utility,  and  this  maximum 
is  obtainable  in  precisely  the  same  way  as  in  other  cases  of  equilibrium 
— that  is,  by  varying  the  "  doses  "  of  capital  and  labour  until  the  final 
utility  in  the  case  both  of  capital  and  labour  becomes  equal.  Gene- 
rally speaking,  this  is  the  law  that  puts  a  limit  to  the  indefinite  expan- 
sion of  industry,  for  whenever  one  element  runs  short,  be  it  land  or 
capital,  labour  or  managing  ability  or  markets,  all  the  others  are 
directly  affected  adversely  and  the  undertaking  as  a  whole  becomes 
more  difficult  and  less  effective.  Pareto  rightly  enough  attaches  the 
greatest  importance  to  this  law,  and  we  have  only  to  remember  that 
it  is  the  direct  antithesis  of  the  famous  law  of  accumulation  of 
capital  to  realise  its  full  significance. 

There  are  several  other  cases  of  interdependence  to  which  the 
new  school  has  drawn  attention,  as,  for  example,  that  of  certain 
complementary  goods  whose  values  cannot  vary  independently. 
What  is  the  use  of  one  glove  or  one  stocking  without  another,  of 
a  motor-car  without  petrol,  of  a  table  service  without  glasses  ? 

1  Professor  Edgeworth  employs  a  similar  comparison,  speaking  of  the 
economic  man  as  a  charioteer  and  of  social  science  as  consisting  of  a  chariot 
and  some  such  charioteer  (Mathematical  Psychics,  p.  15).  ' '  Mecanique  Sociale  ' 
may  one  day  take  her  place  along  with  '  Mecanique  Celeste,'  throned  each  upon 
the  double-sided  height  of  one  maximum  principle,  the  supreme  pinnacle  of 
moral  a*  of  physical  science."  (Ibid.,  p.  12.) 

Pareto  regards  political  economy  as  a  study  of  the  balance  between  desires 
and  the  obstacles  which  stand  in  the  way  of  their  satisfaction. 


CRITICISM  OF  THE  HEDONISTIC  DOCTRINES  537 
Not  only  is  this  true  of  consumption  goods;  it  also  applies  to 
production  goods.  The  value  of  coke  is  necessarily  connected  with 
the  value  of  gas,  for  you  cannot  produce  the  one  without  the  other, 
and  this  applies  to  all  by-products.  The  possibility  of  utilising  a 
by-product  always  lowers  the  price  of  the  main  commodity. 


IV  :    CRITICISM  OF  THE  HEDONISTIC  DOCTRINES 

THE  triumph  of  the  new  doctrines  has  been  by  no  means  universal. 
England,  Italy,  and  Germany,  and  even  the  United  States,  where 
one  would  least  expect  enthusiasm  for  abstract  speculation,  have 
supplied  many  disciples,  and  several  professorial  chairs  and  learned 
reviews  have  been  placed  at  their  disposal.  But  up  to  the  present 
France  seems  altogether  closed  to  them.  Not  only  was  Walras, 
the  doyen  of  the  new  school,  forced  to  leave  France  to  find  in  foreign 
lands  a  more  congenial  environment  for  the  promulgation  of  his  ideas, 
but  until  recently  it  would  have  been  quite  impossible  to  mention  a 
single  book  or  a  single  course  of  lectures  given  either  in  a  university  or 
anywhere  else  in  which  these  doctrines  were  taught  or  even  criticised. 1 
We  might  have  understood  this  antipathy  more  easily  if  France, 
like  Germany,  had  already  been  annexed  by  the  Historical  school. 
There  would  have  been  some  truth  in  a  theory  of  incompatibility 
of  tempers  under  circumstances  of  that  kind.  But  the  great 
majority  of  French  economists  were  still  faithful  to  the  Liberal 
tradition,  and  one  might  naturally  have  expected  a  hearty  wel- 
come for  a  school  that  is  essentially  Neo-Classical  and  pretends 
nothing  more  than  to  give  a  fuller  demonstration  of  the  theories 
already  taught  by  the  old  masters.2 

1  During  the  last  few  years  we  have  had,  of  coarse,  M.  Colson's  great  book  on 
political  economy,  which  contains  a  mathematical  treatment  of  demand  and 
supply,  M.  Landry's  exposition  of  the  Austrian  theory  in  his  Manuel  d'ficono- 
mique,  and  M.  Antonelli  giving  a  special  course  on  Walras's  system  at  the  College 
libre  des  Sciences  sociales.     We  have  already  referred  to  Aupetit's  book  on  money. 
We  must  also  mention  the  translations  of  the  Manual  of  Political  Economy  of 
Vilfredo  Pareto  and  of  Jevons'B  Theory  of  Political  Economy. 

2  M.  Paul  Leroy-Beaulieu  is    particularly  severe  upon  the  Mathematical 
method.     "  It  is  a  pure  delusion  and  a  hollow  mockery.     It  has  no  scientific 
foundation  and  is  of  no  practical  use.     It  is  as  much  a  gamble  as  the  scramble  for 
prizes  at  the  table  at  Monte  Carlo.  .  .  .  The  so-called  curve  of  utility  or  demand 
is  of  no  earthly  use,  for  if  the  price  of  wine  goes  up  the  consumption  of  beer  or 
cider  will  increase,  that  is  all."    (Traiti  d'£c»nomie  politique,  voL  i,  p.  85 ;  voL  iii, 
p.  62.) 

This  last  criticism  is  somewhat  unexpected,  for  we  have  already  seen  that  tiw 
Hedonists  are  very  far  indeed  from  ignoring  the  law  of  substitution.  If  they  did 
not  actually  discover  it  they  immensely  amplified  it.  And  it  is  very  probable 


538  THE  HEDONISTS 

The  mere  fact,  however,  that  they  presumed  to  draw  fresh  lessons 
or  to  deduce  new  principles  from  those  already  formulated  by  the 
older  writers  appeared  an  unwarranted  interference  with  doctrines 
that  had  hitherto  seemed  good  enough  for  everyone.  Criticism  of 
that  kind,  of  course,  is  not  worth  serious  attention. 

An  easier  line  of  criticism,  and  one  very  frequently  adopted, 
is  to  maintain  that  the  wants  and  desires  of  mankind  are  incapable 
of  measurement  and  that  mathematical  causations  can  never  be 
reconciled  with  the  doctrine  of  free  will.  But  such  claims  as 
these  were  never  put  forward  by  the  Mathematical  school.  On 
the  contrary,  it  has  always  recognised  that  every  man  is  free  to 
follow  his  own  bent — trahit  sua  guemque  voluptas — merely  inquiring 
how  man  is  to  act  if  he  is  to  obtain  the  maximum  satisfaction 
out  of  the  means  at  his  disposal  and  to  overcome  the  obstacles 
that  stand  in  his  way.  Neither  has  it  ever  ventured  to  say  that 
such  and  such  a  man  is  forced  to  sell  corn  or  to  buy  it,  but  simply 
that  if  he  does  buy  or  sell  it  will  be  with  a  determination  to  make 
the  best  of  the  bargain,  and  that  such  being  the  case  the  buying  or 
selling  will  take  place  in  such  and  such  a  fashion.  It  further  claims 
that  the  action  of  a  number  of  individuals  under  similar  circumstances 
is  equally  calculable.  So  is  the  movement  of  the  balls  on  the 
billiard-table,  but  that  does  not  interfere  with  the  liberty  of  the 
players.1 

Nor  do  they  pretend  to  be  able  to  measure  our  desires.  What 
they  do— and  it  is  not  so  absurd  after  all,  because  we  are  all  doing 
it — is  to  express  in  pounds,  shillings,  and  pence  the  value  we  put 
upon  the  acquisition  or  loss  of  an  object  that  satisfies  our  desire. 
Moreover,  the  Mathematical  school  does  not  make  much  use  of 

that  if  there  had  been  a  contradiction  between  their  doctrines  and  this  law  it 
would  not  have  escaped  them.  Moreover,  we  note  that  beer  and  cider  have  their 
demand  corves :  cann'ot  wine  have  one  as  well  ?  Having  to  pass  from  one  to 
the  other  does  undoubtedly  complicate  matters,  and  the  Mathematical  economist 
frequently  finds  himself  obliged  to  juggle  not  with  one  but  with  two  or  three  balls. 
But  this  is  just  the  kind  of  difficulty  which  is  amenable  to  mathematical  treat- 
ment— nay,  even,  perhaps,  demands  it.  The  connection  between  the  values  of 
complementary  or  supplementary  goods  is  one  of  the  problems  that  has  been 
most  thoroughly  investigated  by  the  Hedonists.  See  Pantaleoni,  Economia  pura. 

A  criticism  of  Mathematical  economics  may  be  found  in  an  article  by  M. 
Simiand  entitled  La  Methode  positive  en  Science  economique  (Revue  de  Meta- 
pliysique  ft  de  Morale,  November  1908),  and  a  good  reply  in  La  Methode  mathi- 
matique  en  ficonomie  politique,  by  M.  Bouvier. 

1  Walras  put  it  well  when  he  wrote  as  follows :  "  We  have  never  tried  to 
analyse  the  motives  of  free  human  beings.  We  have  simply  tried  to  give  a 
mathematical  expression  of  the  result."  (Sl&ments  d'Sconomie  volitique  pure 
p.  232.) 


CRITICISM  OF  THE  HEDONISTIC  DOCTRINES     539 

numbers,  but  confines  itself  to  algebraical  notation  and  geometrical 
figures — that  is,  to  the  consideration  of  abstract  quantities.  To 
write  down  a  problem  in  the  form  of  a  mathematical  equation  is 
to  show  that  the  problem  can  be  solved  and  to  give  the  conditions 
under  which  solution  is  alone  possible.  Beyond  this  the  economist 
never  goes.  He  never  tries  to  fix  the  price  of  corn,  whatever  it  may 
be  ;  he  leaves  that  to  the  speculators.1 

From  the  other  side — that  is,  from  the  historians,  interventionists, 
solidarists,  socialists — comes  criticism  which  is  quite  as  bitter  and 
not  a  whit  easier  to  justify.  The  Hedonistic  doctrine  appears  to 
them  simply  as  a  fresh  attempt  to  restore  the  optimistic  teaching 
of  the  Manchester  school,  with  its  individualism  and  egoism,  its 
free  competition  and  general  harmony,  its  insidious  justification  of 
interest,  rent,  and  starvation  wages — in  the  name  of  some  imaginary 
entity  which  they  call  marginal  utility.  In  short,  it  looks  just  like 
another  proof  of  the  thesis  that  the  present  economic  order  is  the  best 
possible — a  proof  that  is  all  the  less  welcome  seeing  that  it  claims 
to  be  scientific  and  mathematically  infallible. 

This  sort  of  criticism  is  nothing  less  than  caricature.  It  would 
be  futile  to  deny  that  the  new  school  has  undertaken  the  task  of 
carrying  on  the  work  of  the  Classical  writers,  but  what  possible 
harm  can  there  be  in  that  ?  The  royal  road  of  science  often  turns 
out  to  be  nothing  better  than  a  very  narrow  path — but  it  does 
lead  somewhere.  There  would  be  no  progress  in  economic  science 
or  in  any  other  if  every  generation  were  to  throw  overboard  all 
the  work  done  by  its  predecessors.  What  the  Hedonistic  school 
has  tried  to  do  is  to  distinguish  between  the  good  and  the  bad 
work  of  the  Classical  writers  and  to  retain  the  one  while  rejecting 
the  other. 

The  main  object  of  the  equilibrium  and  final  utility  theories  is 
not  to  justify  the  present  economic  regime,  but  merely  to  explain  it,1 
which  is  quite  a  different  matter.  But  it  does  happen  in  this  case 
that  the  explanation  justifies  the  conclusion  that  under  the  conditions 
of  a  free  market  the  greatest  good  of  the  greatest  number  would  natu- 
rally be  secured.  The  term  "good,"  however,  is  used  in  a  purely 
Hedonistic  and  not  in  the  ethical  sense.  No  attention  is  paid  to 

1  "  We  do  not  know  exactly  what  it  is  that  binds  the  function  and  the  variable 
together,  or  the  intensity  of  the  satisfied  need  to  the  quantity  already  consumed. 
But  for  every  item  on  the  one  side  we  feel  certain  that  there  must  be  a  corre- 
sponding item  on  the  other."    (Aupetit,  Theorie  de  la  Monnaie,  p.  42.) 

2  For  a  vigorous  refutation  of  this  criticism  gee  two  articles  by  Rist  entitled 
Sconomie  optimiste  and  Economic  scitntifique.  in  the  Revue  de  Mitaphysiqw  et  dt 
Morale,  for  July  1904  and  September  1907. 


540  THE  HEDONISTS 

the  pre-existing  conditions  of  the  exchange,  and  none  is  bestowed 
upon  its  possible  consequences.  The  old-time  bargain  between 
Esau  and  Jacob,  when  the  former  sold  his  birthright  for  a  mere 
mess  of  pottage,  gave  the  maximum  of  satisfaction  to  both,  even 
to  Esau,  of  whom  it  is  related  that  he  was  at  the  point  of  death, 
and  to  whom  accordingly  the  pottage  must  have  been  of  infinite 
value.  Even  if  Jacob  had  offered  him  a  bottle  of  absinthe  instead 
the  result  would  have  been  equally  satisfactory  from  a  Hedonistic 
standpoint.  The  theory  takes  as  little  account  of  hygiene  as  it 
does  of  morals. 

The  Hedonist,  by  way  of  amendment,  might  suggest  that  Esau 
would  have  made  a  better  bargain  if  there  had  been,  not  one,  but 
several  Jacobs  offering  the  pottage,  which  helps  to  explain  why 
they  are  so  partial  to  competition  and  so  strongly  opposed  to 
monopoly.1  No  Hedonist  would  deny  that  Esau  was  exploited  by 
Jacob ;  but,  on  the  other  hand,  they  would  point  out  that  there  is 
no  necessity  to  imagine  that  society  is  made  up  only  of  Esaus  and 
Jacobs.2 

The  same  thing  applies  to  Bohm-Bawerk's  celebrated  theory 
of  interest.  Indeed,  Bohm-Bawerk  quite  definitely  states  that  he 
merely  wants  to  discover  some  explanation  of  interest,  but  does  not 
anticipate  that  he  will  be  able  to  justify  it,  and  in  that  spirit  he 
condemns  the  ethical  justifications  that  were  attempted  some 
centuries  back.  His  object  is  to  show  that  interest  is  neither  due 
to  the  productivity  of  capital  nor  to  the  differential  advantages 
enjoyed  by  its  possessor.  Neither  is  it  a  tax  levied  upon  the 
exploited  borrower  :  it  is  simply  a  time-payment.  In  other  words, 
it  represents  the  difference  between  the  value  of  a  present  good 
and  the  same  good  on  some  future  occasion.  It  is  just  the  result 
of  exchanging  a  present  good  for  a  future  one.  A  hundred  francs 
a  year  hence  are  not  equal  in  value  to  a  hundred  francs  here  and 
now.  To  make  them  equal  we  must  either  add  something  by  way 
of  interest  to  the  future  item  or  take  away  something  by  way  of 
discount  from  the  present  one.3 

1  Or  he  will  argue,  perhaps,  that  the  market  would  have  been  much  more 
favourable  to  Esau  if  Jacob  had  had  more  pottage  than  he  could  easily  have  dis- 
posed of — a  case  where  even  monopoly  might  offer  some  advantage  to  the  buyer. 

*  "For  purposes  of  demonstration,"  says  Pareto,  "we  have  assumed  the 
existence  of  private  property.  But  to  assume  on  the  strength  of  the  conclusion 
which  we  have  established  that  a  rigime,  of  private  property  gives  the  maximum 
of  well-being  would  clearly  be  to  beg  the  question." 

3  This  doctrine  is  not  accepted  even  by  all  the  Hedonists.  Walras  especially 
is  very  critical  in  the  fourth  edition  of  his  ficonomie  pure.  M.  A.  Landez  in  his 


CRITICISM  OF  THE  HEDONISTIC  DOCTRINES      541 

Turning  to  the  theory  of  wages,  according  to  which  the  wages 
of  each  class  of  producers  is  supposed  to  be  determined  by  the 
productivity  of  the  marginal  worker  in  that  class,  we  are  struck  by 
the  fact  that  it  is  only  a  little  less  pessimistic  than  the  old  "  brazen 
law."  What  it  really  implies  is  that  the  marginal  worker — the 
worker  whom  the  entrepreneur  is  only  just  induced  to  employ — 
consumes  all  that  he  produces. 

The  Hedonistic  school,  in  short,  has  no  theory  of  distribution, 
neither  does  it  seem  very  anxious  to  have  one.  It  speaks,  not  of 
co-sharers,  but  of  productive  services,  whose  relative  contributions 
it  is  interested  to  discover.  But  it  is  one  thing  to  know  exactly 
what  fraction  of  the  work  is  due  to  a  certain  unit  of  capital  or  a 
given  individual  workman,  and  quite  another  to  know  whether 
workers  or  capitalists  are  being  unfairly  treated. 

The  best  proof  that  the  Hedonists  are  not  mere  advocates  of 
laissez-faire  is  the  general  attitude  of  the  leaders.  It  is  true  that 
the  Austrian  school  has  always  shown  itself  quite  indifferent  to  the 
social  or  working-class  question,1  as  it  is  sometimes  called,  but  it 
certainly  has  a  perfect  right  to  confine  itself  to  pure  economics 
if  it  wishes.  The  other  leaders  of  the  school,  however,  have  clearly 
shown  that  the  method  followed  need  involve  no  such  approval  or 
acquiescence.  Not  to  mention  Stanley  Jevons,  who  in  his  book 
Social  Reform  makes  a  very  strong  case  for  intervention,  we 
have  also  Professor  Walras,  who  stands  in  the  front  rank  of  agrarian 
socialists.  Leaving  aside  merely  utilitarian  considerations,  he 
points  out  that  in  the  interest  of  justice,  which,  as  he  has  been 
careful  to  emphasise,  involves  quite  a  different  point  of  view,  he 
wants  to  establish  a  regime  of  absolutely  free  competition.  But 
how  is  this  to  be  accomplished  ?  Merely  by  means  of  laissez-faire, 
as  the  old  Liberal  school  had  thought  ?  Not  at  all.  It  can  only 
be  done  through  the  abolition  of  monopoly  of  every  kind,  and  land 
monopoly,  which  is  the  foundation  of  every  other,  must  go  first. 

Intirit  du  Capital  (1904)  and  Irving  Fisher  in  The  Sate  of  Interest  (1907)  have  tried 
if  not  to  demolish  it  at  least  to  correct  it  by  giving  a  more  subtle  analysis  of  the 
motives  determining  a  preference  for  a  future  income  as  compared  with  a  present 
one.  This  time-preference,  of  course,  varies  according  to  the  fortune  of  each  and 
other  circumstances. 

1  We  have  already  remarked  on  this  in  the  case  of  M.  Bohm-Bawerk. 
is  another  respect  in  which  the  Hedonists  have  shown  themselves  faithful  to  the 
Classical  tradition.     The  necessity  for  separating  the  art  from  the  science  of 
political  economy,  pure  economics  from  applied,  was  especially  emphasiecd  by 
Courcelle-Seneuil  and  Cherbuliez.     Pareto  put  it  well  when  he  said  that  1 
maximum  of  ophelimity  can  be  put  in  the  shape  of  an  equation,  but  the  man] 
nf  justice  can  not. 


542  THE  HEDONISTS 

The  reform  advocated  in  his  Economic  sociale  consists  of  two 
items,  land  nationalisation  and  the  abolition  of  all  taxation.  The 
two  items  are  intimately  connected  because  the  rents  now  become 
the  possession  of  the  State  will  take  the  place  of  the  taxes,  and  the 
object  of  both  is  the  same,  namely,  the  extension  of  free  competition 
by  securing  to  every  citizen  the  full  produce  of  his  work.  Under 
existing  conditions  the  producer  is  doubly  taxed — in  the  first  place 
by  the  landowner  and  then  by  the  State.1  Moreover,  when  we 
remember  that  the  point  of  equilibrium  in  Walras's  system  occurs 
just  where  the  selling  price  exactly  coincides  with  the  cost  of  pro- 
duction— in  other  words,  where  profit  is  reduced  to  zero — we  begin 
to  realise  how  far  it  is  from  anything  in  the  nature  of  an  apology 
for  the  present  condition  of  things. 

Vilfredo  Pareto,  another  representative  of  this  school,  although 
ultra-individualistic  in  his  opinions  and  extremely  hostile  to  inter- 
ventionism  or  solidarity,  takes  good  care  not  to  connect  his  personal 
opinion  with  the  Hedonistic  doctrines.  'As  a  matter  of  fact  he 
thinks  that,  theoretically  at  least,  the  maximum  of  well-being  might 
be  equally  attainable  under  a  collectivist  regime,  although  he  does 
not  think  that  collectivism  is  yet  possible.  But  this  opinion  is 
founded  upon  "  ethical  and  other  considerations  which  are  quite 
outside  the  scope  of  economics."  2 

M.  Pantaleoni,  who  soars  higher  still  into  the  realm  of  pure, 
transcendental  science,  ventures  to  declare  that  the  substitution 
of  purely  altruistic  motives  for  merely  selfish  ones  would  involve 
about  as  much  change  in  the  calculation  as  would  the  substitution 
throughout  of  a  plus  for  a  minus  sign  in  an  algebraical  equation. 
All  extremes  meet.  Complete  disinterestedness  and  absolute  egoism 
would  necessarily  work  out  very  much  the  same.  Devotion  to 
duty  would  replace  the  clamour  for  rights ;  sacrifices  would  be 
exchanged  instead  of  utilities.  But  the  laws  determining  their 

1  This  system,  according  to  Walras,  would  possess  another  advantage  in  that 
it  would  facilitate  the  establishment  of  free  trade,  which  is  an  ideal  of  the  science. 
The  chief  difficulties  would  thus  be  avoided,  such  as  unequal  import  duties  and 
unequal  degree  of  fertility.  "Free  trade  has  always  involved  the  absence  of 
duties,  and  the  nationalisation  of  land  would  further  result  in  the  free  movement 
of  capital  and  labour  to  whatever  place  might  prove  most  advantageous  to 
them."  (La  Paix  par  la  Justice  sociale  et  par  le  Libre- Schange,  in  Questions 
pratiques  de  Legislation  ouvriere,  September-October  1907.) 

1  The  same  is  true  of  American  economists,  where  the  use  of  the  Hedonistic 
method  is  by  no  means  confined  to  one  school.  Professor  Clark  employs  it,  and 
he  is  rather  inclined  to  Bet  up  an  apology  for  the  present  economic  order  and  to 
trust  to  the  efficacy  of  free  competition.  But  Professor  Patten  also  makes  use  of 
it,  and  he  is  an  interventionist  of  the  extreme  type. 


CRITICISM  OF  THE  HEDONISTIC  DOCTRINES     543 

exchange  would  still  be  the  same.  The  Hedonists  are  not  so  much 
concerned  with  the  morality  of  such  laws  as  with  the  productive 
capacity  of  a  given  economic  state,  just  as  in  the  case  of  a  piece  of 
machinery  the  engineer's  sole  concern  is  to  gauge  the  output  of  that 
machine. 

But  the  most  serious  criticism  passed  upon  the  work  of  the 
school  is  that  at  the  end  of  the  reckoning  nothing  has  been  discovered 
that  was  not  already  known,  to  which  the  Hedonists  reply  that  they 
have  at  least  succeeded  in  making  certain  what  was  only  tentative 
before.     The  discovery  of  truth  appears  to  be  an  intermittent 
process,  and  the  first  vague  presentiment  is  often  as  useful  as  the 
so-called  scientific  discovery.     Astronomy,  which  is  the  most  perfect 
of  the  sciences,  has  progressed  just  in  this  way.     The  older  economists 
felt  fully  convinced  that  the  rtgime  of  free  competition  was  best,  but 
they  gave  no  reason  for  the  faith  that  was  in  them  and  no  demonstra- 
tion of  the  conditions  under  which  the  doctrine  was  true.     Such  a 
demonstration  the  Mathematical  economists  claim  to  have  given  by 
showing  that  a  rtgime  of  free  competition  is  the  only  one  where  a 
maximum  of  satisfaction  is  available  at  a  minimum  of  sacrifice  for 
both  parties.     The  same  consideration  applies  to  the  law  of  demand 
and  supply,   the  law  of  indifference,   cost  of  production,   wages, 
interest,  rent,  etc.    To  have  given  an  irrefutable  demonstration  of 
theories  that  were  formerly  little  better  than  vague  intuitions  *  or 
amorphous  hypotheses  is  certainly  something.     We  may  laugh  as 
much  as  we  like  at  the  homo  ceconomicus,  who  is  by  this  time  little 
better  than  a  skeleton,  but  it  is  the  skeleton  that  has  helped  the 
science  to  stand  upright  and  make  progress.     It  has  helped  forward 
the  process  from  the  invertebrate  to  the  vertebrate. 

But  admitting  that  all  these  doctrines  have  been  definitely 
proved,  as  the  Hedonists  claim  they  have,  is  the  science  going  to 
profit  as  much  as  they  thought  by  it  ?  Somebody  has  remarked 
that  mathematics  is  a  mere  mill  that  grinds  whatever  is  brought  to 
it.  The  important  question  is,  What  is  the  corn  like?  In  this  case 
it  consists  of  a  mass  of  abstractions— a  number  of  individuals 
actuated  by  the  same  selfish  motives,  alike  in  what  they  desire  to 
get  and  are  willing  to  give,2  the  assumed  ubiquity  of  capital  and 
labour,  facility  for  substitution,  etc.  It  is  possible  enough  that  the 

i  Economics  will  become  a  science  when  it  can  say  that  "  what  was  just  now 
nothing  better  than  an  intuition  can  now  be  fully  proved."  (Walras,  Economic 
politique  pure,  p.  427.) 

«  "  It  ia  necessary  to  apply  the  law  of  the  variation  of  intensity  of  need  t 
each  separate  individual  in  relation  to  each  one  of  his  needs."     (Aupetit,  I* 
Monnaie,  p.  93.) 


544  THE  HEDONISTS 

flour  coming  from  the  mill  may  not  prove  very  nutritious.  When 
ground  out  the  result  would  at  any  rate  be  as  unlike  reality  as  the 
new  society  outlined  by  Fourier,  the  Saint-Simonians,  or  the 
anarchists,  and  its  realisation  quite  as  improbable,  unless  we  pre- 
suppose an  equally  miraculous  revolution.  The  Hedonists  frankly 
recognise  this,  and  in  this  respect  they  show  themselves  superior  to 
the  Classical  economists,  who  when  they  talk  of  free  competition 
believe  that  it  actually  exists.1 

But  however  sceptical  they  are  about  the  possibility  of  ever 
realising  all  this,  they  are  somewhat  emphatic  about  the  virtues  of 
the  new  method,  and  they  are  not  exempt,  perhaps,  from  a  certain 
measure  of  dogmatic  pride  which  irresistibly  reminds  one  of  the 
Utopian  socialists.  Could  we  not,  for  example,  imagine  Fourier 
writing  in  this  strain  :  "  What  has  already  been  accomplished  is 
as  nothing  compared  with  what  may  be  discovered  "  (by  the  applica- 
tion of  the  mathematical  method) ; 2  or  "The  new  theories  concern- 
ing cost  of  production  have  the  same  fundamental  importance  in 
political  economy  that  the  substitution  of  the  Copernican  for  the 
Ptolemaic  system  has  in  astronomy"?3  We  have  already  called 
attention  to  the  comparison  of  Walras's  system  with  Newton's 
Principia — all  of  which  rather  savours  of  enthusiasm  outrunning 
judgment. 

While  recognising  the  very  real  services  which  the  Mathematical 
and  Austrian  schools  have  rendered  to  the  science,  and  admitting 
that  they  mark  an  era  in  the  history  of  economics  which  can  never  be 
forgotten,  we  cannot  do  better  than  conclude  with  the  advice  of  an 
economist  who  is  himself  an  authority  both  in  the  Mathematical 
and  Classical  schools,  and  who  is  therefore  well  qualified  to  judge : 
"  The  most  useful  applications  of  mathematics  to  economics  are 
those  which  are  short  and  simple  and  which  employ  few  symbols  ; 
and  which  aim  at  throwing  a  bright  light  on  some  small  part  of  the 
great  economic  movement  rather  than  at  representing  its  endless 
complexities."  * 

1  It  is  only  those  Hedonists  who  claim  to  be  able  to  establish  an  exact  science 
that  make  use  of  the  mathematical  and  abstract  method  to  the  total  exclusion 
of  the  historical  and  biological  method.  Professor  Marshall  expressly  declares 
himself  in  favour  of  the  biological  method,  and  would  advocate  employing 
diagrams  and  curves  as  little  as  possible  (Economic  Journal,  March  1898,  p.  50). 

1  Pareto,  Qiorncdi  degli  Economist,  September  1901. 

3  Bohm-Baw^rk,  the  Austrian  Economists,  he.  cit.  On  the  other  hand,  one  of 
the  disciples  of  this  school,  M.  Landry,  writes  :  "  To-day  the  Austrian  school  is 
Bomewhat  played  out  "  (L'Ecole  economique,  in  Rivistadi  Scienza,  1907).  At  the 
end  of  thirty  years  ! — not  a  very  long  life. 

•  Marshall,  Distribution  and  Exchange,  in  Economic  Journal,  March  1898. 


THE  THEORY  OF  RENT  545 

CHAPTER  II :   THE  THEORY  OF  RENT  AND 
ITS  APPLICATIONS 

THE  revival  of  interest  in  Classical  theories,  of  which  mention  was 
made  in  the  last  chapter,  cannot  be  passed  over  without  a  special 
reference  to  the  theory  of  rent.  The  theory  of  rent  has  always 
held  a  prominent  place  in  economic  science,  especially  during  the 
earlier  years  of  the  nineteenth  century,  and  the  recent  developments 
it  has  undergone  are  significant  equally  from  a  theoretical  as  from 
a  practical  standpoint. 

Theoretically  it  has  been  shown  that  the  concept  rent,  which 
for  a  long  time  was  supposed  to  be  indissolubly  bound  up  with  a 
particular  economic  phenomenon,  namely,  the  revenue  of  landed 
proprietors,  is  capable  of  several  applications  and  extensions,  some 
of  which  might  throw  considerable  light  into  more  than  one  obscure 
corner  of  the  economic  world.  Particularly  does  it  seem  applicable 
to  a  kind  of  revenue  of  which  we  hardly  heard  mention  until  recently 
— that  is,  the  profits  of  the  entrepreneur  as  distinct  from  the  interest 
of  the  capitalist. 

Practically  also  it  is  very  important.  Rent  is  "  unearned 
increment  "  par  excellence.  In  other  words,  it  is  a  revenue  for 
which  the  receiver  has  ostensibly  done  nothing.  One  can  well 
imagine  what  fruitful  ground  for  socialistic  theories  this  must  be  I 
And,  as  a  matter  of  fact,  all  systems  of  land  nationalisation  or  of 
socialisation  of  rent — and  they  are  by  no  means  few  in  number — 
trace  descent  from  the  old  Ricardian  theory. 

What  we  propose  to  do  in  this  chapter  is  to  examine  the  doctrine 
of  rent  in  its  twofold  aspect,  inquiring  in  the  first  place  what 
developments  it  has  recently  undergone  as  a  scientific  theory, 
and,  secondly,  how  it  is  proposed  to  apply  this  theory  with  a  view 
to  reforming  society.  The  chief  aim  in  view  is,  of  course,  to  glean 
some  knowledge  of  recent  theories,  but  to  do  this  we  shall  often 
find  ourselves  obliged  to  follow  the  stream  backward  towards 
its  source  in  Mill  or  Ricardo,  for  in  many  cases  it  is  the  only  way 
of  appreciating  the  development  of  ideas. 


I:  THE  THEORETICAL  EXTENSION  OF  THE 
CONCEPT  RENT 

IN  a  former  chapter  we  were  led  to  investigate  the  utterly  futile 
attempts  made  both  by  Carey  and  Bastiat  to  undermine  the  Ricardian 

E.D.  »' 


546  THE  THEORY  OF  RENT 

theory  of  rent.  Open  to  criticism  the  theory  certainly  is,  but  in 
their  anxiety  to  do  away  with  it  altogether  these  critics  were  led  to 
deny  that  the  land  had  any  value  at  all. 

But  this  denial  has  been  refuted  in  no  equivocal  fashion  by  the 
emergence  of  what  is  perhaps  the  most  striking  phenomenon  in 
nineteenth-century  history,  namely,  the  fabulous  prices  paid  for 
land  in  the  neighbourhood  of  large  cities.  The  last  century  was 
pre-eminently  the  century  of  big  towns.  No  other  epoch  hi  history 
can  point  to  such  growth  of  urban  centres.  England,  America, 
Germany,  and  to  a  lesser  degree  France,  have  all  had  a  share  in 
this  development.  One  result  of  this  rapid  agglomeration  of  popula- 
tion hi  restricted  areas  has  been  a  wonderful  growth  of  rents,  or 
unearned  increment.  A  quarter  of  an  acre  of  land  in  the  city  of 
Chicago  which  was  bought  in  1880  for  $20,  at  a  time  when  the 
population  was  only  fifty,  and  which  in  1836  was  sold  for  $25,000, 
was  valued  at  $1,250,000  at  the  time  of  the  International  Exhibition 
in  1894.  It  has  been  calculated  that  the  increase  in  ground-rents 
in  London  between  1870  and  1895  is  represented  by  no  less  a  sum 
than  £7,000,000.  Hyde  Park,  bought  by  the  City  of  London  in  1652 
for  £17,000,  is  to-day  valued  at  about  £8,000,000.  M.  d'Avenel  states 
that  in  Paris  a  piece  of  land  belonging  to  the  Hdtel  Dieu  which  was 
valued  at  6  fr.  40  c.  a  square  metre  in  1775  is  worth  1000  fr.  to-day,1 
and  M.  Leroy-Beaulieu  mentions  a  piece  of  land  in  the  neighbourhood 
of  the  Arc  de  Triomphe  which  between  1881  and  1904,  i.e.  in  twenty- 
three  years,  has  doubled  its  value  and  is  now  selling  at  800  fr.  a 
metre  as  compared  with  400  fr.  formerly.1  We  have  merely  quoted 
a  few  isolated  examples,  but  they  may  be  regarded  as  typical. 

Carey  and  Bastiat  have  not  made  many  converts,  evidently. 
The  majority  of  economists  have  either  accepted  Ricardo's  theory 
or,  having  been  induced  to  examine  his  position  thoroughly,  have 
been  led  to  develop  it,  but  none  of  them  has  denied  the  reality  of 
the  income  derived  from  land.  Hence  the  very  curious  twofold 
evolution  which  the  theory  presents. 

On  the  one  hand  there  has  been  discovered  a  whole  series  of 
differential  revenues  analogous  to  the  rent  of  land,  which,  according 
to  the  expression  of  a  great  contemporary  economist,  "is  not  a 
thing  by  itself,  but  the  leading  species  of  a  large  genus."  8  On  the 

1  Our  figures  are  taken  from  the  well-informed  pamphlet  of  M.  Einaudi, 
La  Municipalitation  du  Sol  dans  lea  Grande*  Vittes  (Girard  et  Briere,  1898),  re-- 
printed  from  Devenir  social. 

1  P.  Leroy-Beaulieu,  L'Art  de  placer  et  gerer  sa  Fortune,  p.  34. 

1  Marshall,  Principles,  preface  to  the  first  edition. 


THEORETICAL  EXTENSION  OF  RENT  547 

other  hand  (and  this  second  line  of  development  is  perhaps  more 
curious  than  the  first),  while  Ricardo  considered  that  the  rent  of 
land  was  an  economic  anomaly  resulting  from  special  circumstances, 
such  as  the  unequal  fertility  of  the  land  or  the  law  of  diminish- 
ing returns,  modern  theorists  regard  it  simply  as  the  normal 
result  of  the  regular  operation  of  the  laws  of  value.  The  rent 
of  land  and  similar  phenomena  seem  to  fit  in  with  the  general 
theory  of  prices,  and  the  theory  of  rent  so  laboriously  constructed 
by  the  Classical  school  falls  into  the  background  as  being  com- 
paratively useless.  Despite  its  prestige  throughout  the  nineteenth 
century,  in  a  few  more  years  it  will  be  regarded  as  a  mere  historical 
curiosity. 

This  double  evolution  is  the  result  of  simultaneous  efforts  on 
the  part  of  a  great  number  of  economists.  It  is  almost  impossible 
to  trace  a  regular  sequence  of  advances  from  one  to  the  other,  and 
we  shall  content  ourselves  with  a  mere  mention  of  the  names  of 
those  who  have  contributed  most  to  it,  their  actual  words  being 
quoted  whenever  possible.1 

(a)  In  the  first  place,  we  have  a  number  of  differential  revenues 
which  are  exactly  analogous  to  the  rent  of  land.  Equal  quantities, 
or,  as  the  English  economists  prefer  to  put  it,  equal  doses  of  capital 
and  labour  applied  to  different  lands  yield  different  revenues  :  such 
was  the  classic  statement  of  the  law  of  rent.  Ricardo  attributed 
the  existence  of  rent  to  the  presence  of  particular  phenomena  apper- 
taining only  to  land,  such  as  diminishing  returns,  unequal  fertility, 
greater  or  lesser  distance  from  a  market.  But  it  has  long  been 
realised  that  agriculture  is  by  no  means  the  only  domain  in  which 
capital  and  labour  yield  unequal  returns. 

All  natural  sources  of  wealth — mines,  salt-works,  and  fisheries — 
give  rise  to  exactly  similar  phenomena.  Their  productivity  is  not 
identical,  their  fertility  (if  the  term  is  permissible)  presents  the  same 
differences  and  their  position  relative  to  a  market  the  same  variety 
as  in  the  case  of  cultivated  lands.  Consequently  every  mine,  every 
salt- work  and  fishery  that  is  not  on  the  margin  of  cultivation  yields 
a  differential  revenue  or  rent  because  of  its  greater  productivity 
or  more  convenient  situation.  Ricardo  had  recognised  this  in 

1  There  is  a  good  account  of  the  evolution  of  which  we  have  given  a  brief 
ritume  in  a  work  published  as  far  back  as  1868,  entitled  Versuch  tiner  Kritischen 
Dogmengeschichte  der  Orundrente,  by  Edward  Berens  (Leipzig),  but  especially 
in  La  Theorie  de  la  Rente  et  son  Extension  recente,  by  Paul  Frezouls  (Montpellier, 
1908),  and  in  the  very  interesting  articles  of  Heir  Schumpeter,  Das  Renten- 
primip  in  der  Vertheilungslehre,  which  appeared  in  Schmoller'a  Jahrbiich  in 
1907,  pp.  31  and  691. 


548  THE  THEORY  OF  RENT 

the  case  of  mines,  and  Stuart  Mill  insisted  upon  its  farther 
extension.1 

Further,  land  is  not  employed  for  tilth  only  ;  it  is  also  frequently 
used  for  building  purposes.  The  services  which  it  renders  in  this 
connection  are  not  less  important  than  the  others,  and  between 
different  sites  there  are  as  many  distinctions  as  there  are  between 
the  various  grades  of  cultivated  lands.  Their  commercial  produc- 
tivity, if  we  may  so  put  it,  is  by  no  means  uniform.  "  The  ground- 
rent  of  a  house  in  a  small  village  is  but  a  little  higher  than  the  rent 
of  a  similar  patch  of  ground  in  the  open  fields,  but  that  of  a  shop 
in  Cheapside  will  exceed  this  by  the  whole  amount  at  which  people 
estimate  the  superior  facilities  of  money-making  in  the  more  crowded 
place.  In  this  way  the  value  of  these  sites  is  governed  by  the 
ordinary  principles  of  rent."  a 

But  why  even  confine  attention  to  land  and  its  uses  ?  Degrees 
of  productivity  and  differences  of  returns  are  equally  evident  in 
the  case  of  capital.  The  machinery  in  one  shop  may  be  better,  the 
organisation  more  efficient,  division  of  labour  more  fully  developed 
than  in  another  because  of  the  relatively  greater  abundance  of 
capital,  with  the  result  that  the  production  in  the  one  case  will 
exceed  the  production  in  the  other,  resulting  in  a  supplementary 
gain  in  the  case  of  the  first  shop.3  Similarly,  the  production  of 

1  Ricardo's  Principles,  chap.  3,  "On  the  Rent  of  Mines."  Cf,  Stuart  Mill, 
Principles,  Book  IDE,  chap.  5,  §  3. 

1  Stuart  Mill,  loc.  cit. 

*  This  fact  was  noted  by  Hermann  even  as  far  back  as  1832  in  his  very 
remarkable  Staatstoirtschaftliche  Unterauchungen  (Munich,  1832),  p.  166 :  "  A 
phenomenon  that  is  exactly  analogous  to  rent  becomes  manifest  whenever  a 
country  employs  imported  machinery  the  multiplication  of  which  is  difficult, 
possibly  because  the  producing  country  discourages  such  exportation.  [Such 
was  the  case  with  English  machinery  at  the  time  Hermann  wrote.]  .  .  .  Suppose 
now  that  the  price  of  the  commodity  manufactured  with  the  aid  of  such  machinery 
goes  up.  If  the  country  under  consideration  can  only  manufacture  with  machi- 
nery that  is  more  expensive  but  less  efficient  because  of  its  defective  character, 
the  cost  of  production  will  still  be  higher  than  if  the  best  [foreign]  machinery 
were  employed.  The  result  is  that  the  proprietors  of  the  latter  retain  such 
advantages  as  the  rise  in  price  had  secured  them."  Mangoldt  (in  Die  Lehre 
vom  Unternehmergewinn,  Leipzig,  1855)  expresses  his  view  in  a  somewhat  similar 
fashion :  "  Rent  shows  itself  clearest  and  on  the  largest  scale  in  the  case  of 
agricultural  land,  but  it  is  equally  evident  wherever  the  difficulty  of  multiplying 
capital  prevails  or  where  it  can  only  be  replaced  by  other  capital  of  a  more  expen- 
sive character  or  a  less  productive  yield."  Ricardo  himself  possibly  had  the 
rent  of  capital  in  mind  when  he  said :  "  The  exchangeable  value  of  all  com- 
modities, whether  they  be  manufactured  or  the  produce  of  the  mines  or  the 
produce  of  land,  is  always  regulated,  not  by  the  less  quantity  of  labour  that 
will  suffice  for  their  production  under  circumstances  highly  favourable,  and 


THEORETICAL  EXTENSION  OF  RENT  549 

one  worker  as  compared  with  another  is  frequently  unequal.  One 
man  without  any  greater  effort  may  get  through  more  work  than 
another,  and  the  earnings  of  that  man  will  exceed  those  of  the  other, 
so  that  even  a  workman  may  enjoy  a  supplementary  gain  of  the 
nature  of  a  differential  rent.  And  not  among  workmen  only  do 
aptitudes  differ,  but  also  among  entrepreneurs.  Rent  of  ability 
plays  an  important  role  in  determining  the  different  degrees  of 
success  experienced  by  different  undertakings  and  the  unequal 
revenues  which  they  yield.  "  The  extra  gains  which  any  producer 
or  dealer  obtains  through  superior  talents  for  business  or  superior 
business  arrangements  are  very  much  of  a  similar  kind."  That 
is  how  Mill l  expressed  it,  content  merely  to  repeat  an  idea  which 
Senior  had  expressed  in  his  Political  Economy  as  early  as  the  year 
1836,  where  he  applies  the  term  "  rent  "  to  "  all  peculiar  advantages 
of  extraordinary  qualities  of  body  and  mind."  2 

The  simple  suggestion  thrown  out  by  Mill  and  Senior  has  long 
since  been  developed  into  a  full-blown  theory  by  Francis  Walker, 
the  American  economist.  The  conception  of  profits  as  the 
remuneration  of  the  entrepreneur's  exceptional  skill  is  examined 
in  his  Treatise  on  Political  Economy,  and  is  further  treated  in 
considerable  detail  in  the  Quarterly  Journal  of  Economics  for  April 
1887.3 

We  have  already  commented  upon  the  optimistic  tendencies  of 
certain  American  economists.  Carey  was  a  case  in  point;  so  is 
Walker.  In  a  work  entitled  The  Wages  Question,  published  in 
1876,  Walker  made  a  successful  attack  upon  that  most  pessimistic 
of  theories,  the  wages  fund,  and  forced  economists  to  recognise  that 
to  some  extent  at  any  rate  the  wages  depended  upon  the  produc- 
tivity of  the  undertaking.  But  to  show  the  possibility  of  wages 

exclusively  enjoyed  by  those  who  have  peculiar  facilities  of  production,  but 
by  the  greater  quantity  of  labour  necessarily  bestowed  on  their  production  by 
those  who  have  no  such  facilities,  by  those  who  contrive  to  produce  them  under 
the  most  unfavourable  circumstances — meaning  by  the  most  unfavourable  cir- 
cumstances the  most  unfavourable  under  which  the  quantity  of  produce  required 
renders  it  necessary  to  carry  on  the  production."  (Principles,  p.  37.)  English 
writers,  however,  seldom  speak  of  the  rent  of  capital.  Rent  with  them  always 
signifies  income  due,  not  to  the  intervention  of  man;  but  to  the  natural  resources 
of  production. 

1  Principles,  Book  III,  chap.  5,  §  4. 

1  "  But  as  it  is  clearly  a  surplus,  the  labour  having  been  previously  paid 
for  by  average  wages,  and  that  surplus  the  spontaneous  gift  of  nature,  we  have 
thought  it  most  convenient  to  term  it  rent."  (Quoted  by  Cannan,  Production 
and  Distribution,  p.  198.) 

*  In  an  article  entitled  TJif  Source  of  Business  Profit. 


550  THE  THEORY  OF  RENT 

growing  with  the  increased  productivity  of  industry  was  hardly 
enough  to  satisfy  sensitive  consciences.  Walker  was  particularly 
anxious  to  foil  the  socialists  by  showing  that  profit  is  not  the  out- 
come of  exploitation,  and  it  was  with  a  view  to  such  demonstration 
that  the  doctrine  of  rent  was  so  greedily  seized  upon. 

By  the  term  "  profit  "  Walker  understands  the  special  remunera- 
tion of  the  entrepreneur,1  omitting  any  interest  which  he  may  draw 
as  the  possessor  of  capital.  This  distinguishes  him  from  the  majority 
of  English  economists,  who,  contrary  to  Continental  practice,  have 
always  persisted  in  confusing  the  functions  of  the  entrepreneur 
and  the  capitalist.  Neither  is  he  content  to  regard  his  work  as 
confined  to  simple  business  arrangement  and  superintendence, 
which  would  result  in  his  being  paid  a  salary  equal  to  that  of  a 
managing  director.  His  work  is  altogether  of  a  more  dignified 
character,  and  consists  largely  in  anticipating  the  fluctuations  of 
the  market  and  in  organising  production  to  meet  them — in  a  word, 
in  adapting  supply  to  demand.  The  entrepreneur  is  the  true 
leader  of  economic  progress — a  real  "  captain  of  industry."  2 

All  this  implies,  says  Walker,  differences  in  industrial  revenues 
exactly  analogous  to  the  differences  in  agricultural  incomes.  Some 
industries  yield  no  profit  at  all  beyond  remunerating  capital  and 
labour  at  the  normal  rate  and  leaving  enough  for  the  entrepreneur 
to  prevent  his  abandoning  the  undertaking  altogether.  Other 
industries  yield  a  little  more,  and  by  imperceptible  gradations  we 
pass  from  such  mediocre  undertakings  to  more  prosperous  ones,  and 
finally  reach  those  that  yield  immense  profits.  The  question  then 
arises  as  to  whether  such  abnormal  profits  in  any  way  represent 

1  Walker  is  one  of  the  first  of  the  English-speaking  economists  to  make  this 
distinction  and  to  employ  the  term  "  profit "  in  a  narrow  sense,  distinguishing 
it  from  interest  on  the  one  hand  and  wages  on  the  other.  He  even  went  so  far 
as  to  subtract  the  wages  of  superintendence  and  direction  because  this  work 
of  supervision  could  be  delegated  to  others  (Wages  Question,  2nd  ed.,  1891, 
pp.  230,  etc.),  while  the  special  function  performed  by  the  entrepreneur,  namely, 
the  adaptation  of  supply  to  demand,  requires  special  remuneration,  which  he 
proposes  to  call  profit.  It  is  a  little  odd  that  a  writer  who  seemed  completely 
isolated  should  be  shown,  after  all,  to  share  the  views  of  other  economists. 
Walker  declares  that  save  his  own  father,  Amasa  Walker,  he  knew  of  no  economist 
who  had  distinguished  between  capitalist  and  entrepreneur.  But  J.  B.  Say  had 
already  made  the  same  distinction,  which  had  been  adopted  by  all  Continental 
economista  even  as  far  back  as  the  beginning  of  the  nineteenth  century. 

*  This  is  how  Walker  summarises  his  duties:  "To  furnish  also  technical 
skill,  commercial  knowledge,  and  powers  of  administration ;  to  assume  responsi- 
bilities and  provide  against  contingencies ;  to  shape  and  direct  production, 
and  to  organise  and  control  the  industrial  machinery."  (The  Wages  Question, 
p.  246.) 


THEORETICAL  EXTENSION  OF  KENT     55 1 

wages  that  have  been  withheld  from  the  workers.  This  is  not  at 
all  likely  because  wages  are  often  highest  where  profits  are  greatest. 
Cceteris  paribus,  the  probability  is  that  the  greater  profit  in  the 
one  industry  as  compared  with  another  implies  the  greater  capacity 
of  the  entrepreneur  in  the  one  case  than  in  the  other.  The  superior 
income  is  a  pure  surplus  like  the  rent  of  land.  "  Under  free  and 
full  competition,"  says  Walker,  "  the  successful  employers  of  labour 
would  earn  a  remuneration  which  would  be  exactly  measured,  in 
the  case  of  each  man,  by  the  amount  of  wealth  which  he  could 
produce,  with  a  given  application  of  labour  and  capital,  over  and 
above  what  would  be  produced  by  employers  of  the  lowest  industrial, 
or  no-profits,  grade,  making  use  of  the  same  amounts  of  labour  and 
capital,  just  as  rent  measures  the  surplus  of  the  produce  of  the 
better  lands  over  and  above  what  would  be  produced  by  the  same 
application  of  labour  and  capital  to  the  least  productive  lands 
which  contribute  to  the  supply  of  the  market,  lands  which  them- 
selves bear  no  rent."  : 

Walker's  theory  contains  a  good  deal  of  truth,  although  it  is 
not,  perhaps,  quite  as  new  as  he  thought  it  was.  The  opinions  of 
Mill  and  Senior  have  already  been  referred  to,  and  more  than  one 
Continental  economist,  from  J.  B.  Say  to  Mangoldt,  and  including 
Hermann,2  have  propounded  similar  views.  Nor  has  the  doctrine 
ever  been  completely  triumphant  in  economic  circles.  Most  con- 
temporary writers,  no  doubt,  regard  profit  as  a  kind  of  rent,  due 
partly,  but  only  partly,  to  the  personal  ability  of  the  entrepreneur.* 
Other  economists — such  as  Marshall,4  for  example — think  that  they 
can  trace  some  other  elements  as  well,  such  as  insurance  against  risk 
and  payment  for  the  necessary  expenses  of  training  the  entrepreneur* 

1  Walker,  Quarterly  Journal  of  Economic*,  April  1887,  p.  278. 

1  Hermann,  Untersuchungen,  p.  206  ;  for  J.  B.  Say  cf.  supra,  p.  113. 

8  Pantaleoni  (Economia  pura,  Part  III,  chap.  4)  seems  to  be  the  only 
economist  who  accepts  Walker's  theory  without  any  reservation. 

4  For  his  criticism  of  Walker  see  the  Quarterly  Journal  of  Economics,  1887, 
p.  479,  and  the  Principles,  4th  edition,  p.  705,  note.  In  conformity  with  English 
tradition,  Marshall  includes  within  profits  any  interest  upon  such  capital  as  the 
entreprentur  possesses. 

1  Pantaleoni  makes  the  same  distinction  :  "  Profits,"  says  he,  "  may  be  the 
result  of  superior  ability  acquired  either  by  assiduous  study  or  prolonged  pre- 
paration. In  that  case  we  are  dealing,  not  with  a  kind  of  rent,  but  with  a  species 
of  profit  which  may  be  very  remunerative  but  which  is  nevertheless  amenable  to 
a  very  different  law  from  that  which  generally  regulates  the  investment  of  capital." 
(Economia  pura,  Part  HI,  chap.  4.)  On  the  other  hand,  Pantaleoni  refuses 
to  recognise  the  existence  of  an  element  of  insurance  against  risk  as  an  item  in 
profits,  because,  as  he  point*  out,  if  the  premium  has  been  carefully  reckoned  up 


552  THE  THEORY  OF  RENT 

Walras,  on  the  other  hand,  omits  these  last  two  items  and  points 
out  that  under  static  conditions  the  entrepreneur  would  neither 
gain  nor  lose.  The  sole  source  of  profit,  then,  are  those  "  dynamic  " 
rents  which  are  the  result,  so  to  speak,  of  the  perpetual  displacements 
of  equilibrium  in  a  progressive  society.  But  these  dynamic  rents 
are  extremely  varied  in  character  and  bear  no  relation  to  the  personal 
qualities  of  the  entrepreneur. 

Clark l  and  others,  although  subscribing  to  Walras's  dictum 
that  profits  are  really  composed  of  rents,  think  that  there  may  be 
static  as  well  as  dynamic  rents  and  that  Walras's  hypothesis  of 
a  uniform  net  cost  for  all  undertakings  is  altogether  too  abstract. 
Only  in  the  case  of  the  marginal  producer,  whose  expenses  are  highest, 
is  there  anything  like  equilibrium  between  costs  and  price.  The 
other  producers  even  when  there  is  no  such  thing  as  a  temporary 
displacement  of  equilibrium,  are  able  to  make  substantial  incomes 
out  of  the  various  species  of  differential  rents  already  mentioned — 
proximity  to  market,  better  machinery,  greater  capital,  etc.  Marshal] 
speaks  of  such  incomes  as  composite  rent.2 

Walker's  theory  has  evidently  not  been  accepted  without  con- 
siderable reservations.  And  we  need  only  remind  ourselves  of 
the  way  in  which  dividends  are  usually  distributed  among  share- 
holders to  realise  the  inadequacy  of  his  conception  of  rent  and  the 
exaggerated  nature  of  his  attempted  justification.  Would  anyone 
suggest,  for  example,  that  such  dividends  are  merely  the  result  of 
exceptional  ability  ?  3 

This  attempted  explanation  of  profit  affords,  perhaps,  the  most 
interesting  illustration  of  the  extension  of  the  concept  rent,  although 
it  is  by  no  means  the  only  one.  The  Ricardian  theory,  worked  out 
to  its  logical  conclusion,  reveals  the  interesting  fact  that  there  are 
as  many  kinds  of  rents  as  there  are  different  situations  in  the 
economic  world.  Whenever  it  becomes  necessary  to  unravel  the 
mystery  surrounding  individual  inequalities  of  income  recourse  is 

and  compared  with  the  risk,  "it  ought  on  an  average  to  be  equal  to  it  at  the 
end  of  a  certain  number  of  years,  so  that  the  net  rent  would  become  equal  to 
Ecro."  (Ibid.) 

1  Of.  Distribution  of  Wealth  (1899)  and  Essentials  of  Economic  Theory  (1908). 

1  Moreover,  the  entrepreneur  may  find  himself  forced  to  yield  a  part  of 
this  composite  rent  either  to  the  landlord  or  to  the  capitalist  from  whom  he 
has  borrowed  his  capital  or  to  the  workers  by  whose  superior  ability  he  has 
benefited.  The  difficult  question  of  determining  what  proportion  ought  to 
be  given  in  this  way  is  discussed  by  Marshall  in  his  Principles,  Book  V,  chap.  10, 
§  4  ;  Book  VI,  chap.  8,  §  9. 

'  Walker  might  answer  by  saying  that  the  dividend  is  simply  the  interest 
upon  the  capital.  But  we  can  hardly  bring  ourselves  to  believe  this. 


THEORETICAL  EXTENSION  OF  RENT  553 

had  to  a  generalised  theory  of  rent.  "  All  advantages,  in  fact, 
which  one  competitor  has  over  another,  whether  natural  or  acquired,1 
whether  personal  or  the  result  of  social  arrangements  .  .  .  assimilate 
the  possessor  of  the  advantage  to  a  receiver  of  rent."  *  Something 
of  the  variety  of  concrete  life  is  thus  reintroduced  into  the  Classical 
theory  of  distribution,  although  all  this  was  at  first  rigidly  excluded 
by  the  doctrine  of  equality  of  interest  and  uniformity  of  wages.* 
The  theory  of  rent  is  an  indispensable  complement  of  the  Classical 
theory  of  distribution,  giving  the  whole  thing  a  much  more  realistic 
aspect.  It  is,  as  it  were,  the  keystone  of  the  whole  structure. 

(6)  But  the  theory  has  also  undergone  another  species  of  trans- 
formation. Ricardo  conceived  of  rent  as  essentially  a  differential 
revenue  arising  out  of  the  differences  in  the  fertility  of  soils.4  Were 
all  lands  equally  fertile  there  would  be  no  rent.  The  same  remark 
applies  to  the  various  species  of  rent  discovered  since  then.  There 
is  always  some  inherent  difference  which  explains  the  emergence 
of  rent,  such  as  the  greater  suitability  of  a  building  site,  the  greater 
vigour  of  the  worker,  or  the  superior  intelligence  of  the  entrepreneur. 
They  are  all  of  a  type.  Entrepreneurs  who  produce  the  same  article, 
workmen  toiling  at  the  same  trade,  capitals  employed  in  the  same 
kind  of  undertaking,  may  be  grouped  in  an  order  of  diminishing 
productivity,  much  as  Ricardo  grouped  the  various  species  of  lands. 
The  last  entrepreneur  of  the  series,  the  last  worker,  or  the  last  item 
of  capital  each  earns  just  enough  to  keep  them  at  that  kind  of 
employment.  All  the  others  produce  more,  and,  seeing  that  they 
all  sell  their  goods  or  services  at  the  same  price,  they  draw  a  rent 
which  is  greater  than  the  income  enjoyed  by  the  others  by  the 
difference  between  their  productivity  and  that  of  the  last  of  the 
series.  The  whole  economic  world  seems  to  be  under  the  dominion  of  a 
kind  of  law  of  unequal  fertility,  not  of  lands  merely,  but  of  capital 
and  individual  capacity  as  well — a  law  which  is  sufficiently  general 

1  This  word  "  acquired  "  is  not  quite  in  conformity  with  the  pure  theory  of 
rent,  for  if  these  advantages  are  acquired  the  remuneration  thus  received  should 
be  considered  merely  as  interest  upon  capital  spent. 

1  Stuart  Mill,  Principles,  Book  III,  chap.  6,  §  4. 

1  "  Wages  and  profits  represent  the  universal  elements  in  production,  while 
rent  may  be  taken  to  represent  the  differential  and  peculiar :  any  difference  in 
favour  of  certain  producers,  or  in  favour  of  production  in  certain  circumstances, 
being  the  source  of  a  gain,  which,  though  not  called  rent  unless  paid  periodically 
by  one  person  to  another,  is  governed  by  laws  entirely  the  same  with  it."  (Ibid., 
Book  III,  chap.  5,  §  4.) 

•  "Rent,  it  should  be  remembered,  is  the  difference  between  the  produce 
obtained  by  equal  portions  of  labour  and  capital  employed  on  land  of  the  same 
or  different  qualities."  (Ricardo,  Principles,  chap.  9.) 


554  THE  THEORY  OF  RENT 

in  its  application  to  explain  all  inequalities  in  the  revenues  of  the 
different  factors  of  production. 

We  cannot  help  feeling  the  artificiality  of  this  conception  and 
wondering  whether  the  differences  in  revenues  are  not  capable  of 
explanation  upon  the  basis  of  a  simpler  and  more  general  principle. 
Is  it  impossible  to  take  account  of  them  directly  and  to  treat  them 
as  something  other  than  an  exception  or  an  anomaly  ?  One  cannot 
avoid  asking  such  questions,  and  the  reply  is  not  far  to  seek. 

Doubts  arise  as  soon  as  we  realise  that  land  may  yield  rent 
apart  from  any  inequality  in  its  fertility.  "  If  the  whole  land  of  a 
country  were  required  for  cultivation,  all  of  it  might  yield  a  rent," 
says  Stuart  Mill.1  Apparently  all  that  is  needed  is  an  intense  demand 
and  a  supply  that  is  never  equal  to  that  demand,  so  that  the  price  is 
permanently  above  the  cost  of  production.2  In  such  a  case  even 
the  worst  land — assuming  that  all  is  not  of  equal  fertility — would 
yield  a  rent.  Mill  was  of  opinion  that  this  rarely  happened  in 
the  case  of  land,  but  was  by  no  means  uncommon  in  the  case  of 
mines.8  Obviously,  then,  rent  is  not  merely  the  outcome  of  unequal 
fertility,  and  the  cause  must  be  sought  elsewhere.  Stuart  Mill  had 
obviously  foreseen  this  when  he  said  that  "  a  thing  which  is  limited 
in  quantity  is  still  a  monopolised  article."  * 

1  Principles,  Book  II,  chap.  16,  §  2. 

a  Ricardo  had  already  made  use  of  the  following  argument :  "  Suppose  that 
the  demand  is  for  a  million  of  quarters  of  corn,  and  that  they  are  the  produce 
of  the  land  actually  in  cultivation.  Now,  suppose  the  fertility  of  all  the  land 
to  be  so  diminished  that  the  very  same  lands  will  yield  only  900,000  quarters. 
The  demand  being  for  a  million  of  quarters,  the  price  of  corn  would  rise,  and 
recourse  must  necessarily  be  had  to  land  of  an  inferior  quality  sooner  than  if 
the  superior  land  had  continued  to  produce  a  million  of  quarters."  (Principles, 
chap.  32,  p.  246.)  Towards  the  end  of  his  life  Ricardo  seems  to  have  been  more 
favourably  inclined  to  a  conception  of  rent  somewhat  closer  akin  to  J.  B. 
Say's.  Compare  the  curious  quotations  given  in  Fr^zouls,  op.  cit.,  p.  21. 

'  "  A  commodity  may  no  doubt,  in  some  contingencies,  yield  a  rent  even 
under  the  most  disadvantageous  circumstances  of  its  production ;  but  only 
when  it  is,  for  the  time,  in  the  condition  of  those  commodities  which  are  abso- 
lutely limited  in  supply,  and  is  therefore  selling  at  a  scarcity  value — which 
never  is,  nor  has  been,  nor  can  be  a  permanent  condition  of  any  of  the  great 
rent-yielding  commodities."  (Principles,  Book  HI,  chap.  6,  §  4.)  For  the 
position  with  regard  to  mines  see  the  same  chapter,  §  3. 

•  In  this  case  Stuart  Mill  seems  to  compare  rent  to  a  monopoly  revenue : 
"  A  thing  which  is  limited  in  quantity,  even  though  its  possessors  do  not  act  in 
concert,  is  still  a  monopolised  article."  (Ibid.,  Book  II,  chap.  16,  §  2.)  The 
expression,  though  adopted  by  several  other  writers,  is  not  quite  accurate. 
In  the  case  of  a  monopoly  the  owners  fix  the  quantity  which  they  will  produce 
beforehand  with  a  view  to  getting  a  maximum  of  profit.  But  this  cannot  apply  to 
landowners.  At  any  rate,  if  there  is  any  monopoly  it  must  be  an  incomplete  one. 


THEORETICAL  EXTENSION  OF  RENT  555 

But  if  such  be  the  explanation  of  rent  on  land  which  is  the  last 
to  be  put  under  cultivation,  what  is  the  explanation  in  the  case  of 
better  lands  ?  We  are  not  sure  that  Stuart  Mill  foresaw  this  problem. 

This  is  how  he  explains  the  emergence  of  rent  on  land  No.  1. 
Production  having  become  insufficient  to  meet  demand,  prices  go 
up ;  but  it  is  only  when  they  have  reached  a  certain  level — a  level, 
that  is  to  say,  sufficiently  high  to  secure  a  normal  return  on  the 
capital  and  labour  employed — that  these  lands  will  be  brought  under 
cultivation.1 

The  cause  of  rent  in  this  case  is  obviously  the  growth  of  demand 
and  not  the  cultivation  of  land  No.  2,  because  the  cultivation  only 
took  place  when  the  prices  had  risen.1  Moreover,  the  effect  of  this 
cultivation  will  be  rather  to  check  than  to  encourage  the  growth 
of  rent  by  arresting  this  upward  trend  of  prices  through  increasing 
the  quantity  of  corn  on  the  market.  The  rent  of  land  No.  1  is 
consequently  a  scarcity  rent  which  results  directly  from  an  increased 
demand  and  is  independent  of  the  quality  of  the  land.  The  real 
cause  of  rent  on  all  lands,  whether  good  or  bad,  is  really  the  same, 
namely,  the  insufficiency  of  supply  to  meet  demand. 

A  similar  process  of  reasoning  might  be  applied  to  the  other 
differential  rents  already  mentioned,  and  the  conclusion  arrived 
at  is  that  rent,  whatever  form  it  take,  is  not  an  anomaly,  but  a 
perfectly  normal  consequence  of  the  general  laws  of  value.  Whenever 
any  commodity,  from  whatever  cause,  acquires  scarcity  value  and 
its  price  exceeds  its  cost  of  production,  there  results  a  rent  for  the 
seller  of  that  product.  Such  is  the  general  formula,  and  therein  we 
have  a  law  that  is  quite  independent  of  the  law  of  diminishing 
returns  and  of  the  unequal  fertility  of  land.8 
1  Stuart  Mill,  Principle*,  Book  III,  chap.  5,  §  1. 

1  Such  was  the  argument  employed  by  J.  B.  Say  in  the  course  of  a  contro- 
versy with  Ricardo.  "  It  is  perfectly  obvious  that  if  the  needs  of  society  raise 
the  price  of  corn  to  such  a  level  as  to  permit  of  the  cultivation  of  inferior  lands 
which  yield  nothing  beyond  wages  for  the  workmen  and  profits  on  the  capital, 
then  that  demand  on  the  part  of  society,  coupled  with  the  price  which  it  can 
afford  to  pay  for  the  corn,  allows  of  a  profit  on  the  most  fertile  or  best  situated 
lands."  (Traitt,  6th  edition,  p.  410.)  Continuing,  he  remarks  :  "  David  Ricardo 
in  the  same  chapter  clearly  shows  that  the  profit  from  land  is  not  the  cause  but 
the  effect  of  the  demand  for  corn,  and  the  reasons  which  he  adduces  in  support 
of  this  view  may  be  turned  against  him  to  prove  that  other  items  in  cost  of 
production,  notably  the  wages  of  labour,  are  not  the  cause  but  the  effect  of  the 
current  price  of  goods."  Ricardo  himself  seemed  on  the  point  of  being  converted 
to  this  view.  See  p.  654,  note  2. 

•  The  theory  of  economic  equilibrium  enables  us  to  give  a  still  better  demon- 
stration of  the  general  nature  of  this  theory  of  rent.  On  this  point  we  may  refer 
to  Pareto's  Court  and  Sensi's  La  JWta  detta  Rendita  (Rome,  191-). 


556  THE  THEORY  OF  RENT 

But  the  issue  was  not  decided  at  a  single  stroke.  English  political 
economy  is  so  thoroughly  impregnated  with  Ricardian  ideas  that 
it  still  adheres  to  the  conception  of  a  differential  rent.  Continental 
economists,  on  the  other  hand,  have  always  regarded  it  as  a  more 
or  less  natural  result  of  the  laws  of  demand  and  supply.  J.  B.  Say 
had  long  since  made  the  suggestion  that  the  existence  of  rent  is  due 
to  the  needs  of  society  and  the  prices  which  it  can  afford  to  pay 
for  its  corn.1  A  German  economist  of  the  name  of  Hermann,  a 
professor  at  Munich,  in  his  original  and  suggestive  work,  Staatswiri- 
schaftliche  Untersuchungen,  published  in  1832,  claims  that  the 
rent  of  land  is  simply  a  species  of  the  income  of  fixed  capital. 
Whereas  circulating  capital,  because  of  its  superior  mobility,  has 
almost  always  a  uniform  rate  of  interest,  fixed  capital,  which  has 
not  that  mobility  and  which  cannot  be  increased  with  the  same 
facility,  has  a  revenue  which  is  generally  greater  than  that  of  circu- 
lating capital.  This  surplus  revenue  or  rent,  instead  of  being  a 
mere  transitory  phenomenon,  might  easily  become  permanent 
provided  the  new  fixed  capital  which  enters  into  competition  with  it 
has  a  lesser  degree  of  productivity.  Such  precisely  is  the  case  with 
land.2  A  little  later  another  German  of  the  name  of  Mangoldt 
defined  rent  as  a  scarcity  price  which  does  not  benefit  all  the  factors 
of  production  equally,  but  only  those  which  cannot  be  readily 
increased  in  amount.  And  rent  appears  in  the  guise  of  a  differential 
revenue  simply  because  scarcity  is  always  relative  and  is  frequently 
kept  in  check  by  substitutes  which  generally  give  a  smaller  margin 
of  profit.3  Schaffle,  in  a  work  partly  devoted  to  the  subject  of  rent,4 

1  Of.  supra,  p.  555,  note  2. 

1  Hermann,  Staatswirtschaftliche  Untersuchungen,  Part  V :  Vom  Geurinn. 
Even  in  the  preface  he  declares  that  the  doctrine  of  the  rent  of  land  must  be 
regarded  as  a  particular  instance  in  the  exposition  of  the  law  governing  the 
returns  from  fixed  capital  in  general. 

*  Mangoldt,  Die  Lehre  vom  Unternehmergewinn  (Leipzig,  1855),  pp.  109  et  aeq. 

4  Die  nationalokonomische  Theorie  der  ausschliessenden  Absatzverhdltnisse 
(Tubing&i) — a  work  in  which  he  attempts  a  justification  of  rents  in  general 
and  of  the  rent  of  land  in  particular.  Rent  he  regards  as  the  reward  offered 
to  anyone  who  knows  how  to  utilise  either  his  personal  capacity  or  his  capital 
or  land  in  a  way  that  is  particularly  advantageous  to  society.  It  supplies 
an  allurement  that  acts  as  the  source  of  all  progress  and  of  all  economic  activity, 
a  sort  of  natural  right  of  ownership  which  society  spontaneously  confers  upon 
those  individuals  who  know  how  to  serve  society,  and  which  competition  causes 
to  disappear  at  the  opportune  moment.  The  rent  of  land  can  be  justified  on 
this  ground  wherever  legislation  has  not  made  an  abuse  of  it.  This  new  claim 
on  behalf  of  rent  is  very  interesting,  and  those  who  regard  rent  as  exclusively 
unearned  increment  may  ponder  over  this  new  characteristic  of  unearned 
incomes. 


THEORETICAL  EXTENSION  OF  RENT  557 

published  in  1867,  insists  on  the  idea  that  the  soil  furnishes  rent 
not  because  it  is  a  gift  of  nature,  but  simply  because  of  its  immobility 
and  the  impossibility  either  of  removing  it  or  of  increasing  its  quan- 
tity. Finally,  Karl  Menger,  in  his  Grundsatze  der  V  olkswirtschaftslchrcy 
published  in  1872,  in  outlining  the  foundations  of  the  modern  doctrine 
of  value,  assimilated  the  theory  of  rent  to  the  general  theory  of 
prices  by  categorically  declaring  that  "  the  products  of  land  as  far 
as  the  nature  of  their  value  is  concerned  afford  no  exception  to  the 
general  rule,  which  applies  to  the  value  of  the  services  of  a  machine 
or  a  tool,  of  a  house  or  a  factory,  or  any  other  economic  good."  x 

The  only  difference,  apparently,  which  recent  economists  recog- 
nise between  rents  conceived  of  in  this  fashion  is  their  greater  or 
lesser  duration.  The  rent  furnished  by  a  first-class  machine  will 
disappear  very  readily  because  new  machines  can  be  turned  out 
to  compete  with  it.  But  when  the  rent  is  due  to  superior  natural 
qualities,  whether  of  land  or  of  men,  the  element  of  rent  will  not 
be  so  easily  got  rid  of.  To  borrow  a  phrase  of  Pareto's,  we  may 
say  that  the  rent  will  be  of  a  more  or  less  permanent  character, 
according  to  the  ease  with  which  savings  can  be  transformed  into 
capital  of  a  more  or  less  durable  kind.8  Dr.  Marshall  sums  up  his 
subtle  analysis  of  the  problem  under  consideration  as  follows  :  "  In 
passing  from  the  free  gifts  of  nature  through  the  more  permanent 
improvements  in  the  soil,  to  less  permanent  improvements,  to  farm 
and  factory  buildings,  to  steam-engines,  etc.,  and  finally  to  the  less 
durable  and  less  slowly  made  implements  we  find  a  continuous  series 
[of  rents]."  » 

1  P.  148. 

*  "  The  sum  paid  for  the  use  of  land  differs  in  no  material  respect  from  the 
Bura  paid  for  the  use  of  other  kinds  of  capital — a  machine,  for  example.  Although 
the  land  or  the  machine  has  to  be  returned  to  its  rightful  owner  in  the  same 
condition  as  it  was  received,  one  ought  to  pay  something  just  because  such 
capitals  are  economically  scarce  ;  in  other  words,  the  amount  existing  at  any 
one  time  or  place  is  not  greater  than  the  demand.  What  differentiates  land 
from  machinery, is  that  savings  might  easily  be  employed  in  turning  out  new 
machinery,  but  cannot  very  well  increase  the  quantity  of  land  in  existence,  or 
at  any  rate  cannot  transform  existing  soils  in  a  manner  that  is  profitable." 
(Pareto,  Coura  d'ficonamie  politique,  vol.  ii,  §  769.)  Marshall  makes  use  of 
analogous  terms :  "  If  the  supply  of  any  factor  of  production  is  limited,  and 
incapable  of  much  increase  by  man's  effort  in  any  given  period  of  time,  then  the 
income  to  be  derived  from  it  is  to  be  regarded  as  of  the  nature  of  rent  rather 
than  profits  in  inquiries  as  to  the  action  of  economic  causes  during  that  period ; 
although  for  longer  periods  it  may  rightly  be  regarded  as  profits  which  are 
required  to  cover  part  of  the  expenses  of  production  and  which  therefore  directly 
enter  into  those  expenses."  (Principles,  1st  ed..  Book  VI,  ohap.  3,  §  1.) 

»  Ibid.,  Book  VI,  chap.  3,  f  7. 


558  THE  THEORY  OF  RENT 

The  series,  we  might  add,  may  be  extended  to  a  point  at  which 
rent  becomes  negative,  i.e.  until  the  conditions  of  demand  and 
supply  become  such  that  the  factor  of  production  which  previously 
yielded  a  supplementary  revenue  no  longer  gives  even  the  normal 
rate  of  remuneration.  Thtinen  had  suggested  the  possibility  of  a 
negative  rent,  and  the  idea  has  been  further  developed  by  Pareto. 

These  modern  writers  seem  to  regard  rent  simply  as  a  result 
of  the  ordinary  operation  of  the  laws  of  supply  and  demand.  The 
concept  rent  has  been  generalised  so  that  it  can  no  longer  be  regarded 
as  a  curiosity  or  an  anomaly.  The  law  of  diminishing  returns 
loses  much  of  its  economic  importance,  and  even  the  Ricardian  theory 
which  is  based  upon  it  seems  imperilled.  After  the  numerous 
polemics  to  which  it  has  given  rise,  it  seems  as  if  this  theory,  along 
with  the  Classical  theory  of  value,  were  about  to  be  relegated  to  the 
class  of  doctrines  in  which  the  historian  is  still  interested  but  which 
are  apparently  of  little  practical  value,1 


II :   UNEARNED  INCREMENT  AND  THE  PROPOSAL  TO 
CONFISCATE  RENT  BY  MEANS  OF  TAXATION 
IT  does  not  appear  that  Ricardo  fully  realised  the  damaging  conse- 
quences which  would  ensue  if  the  doctrine  of  rent  ever  happened 
to  be  made  the  basis  of  an  attack  upon  the  institution  of  private 
property.    He  was  quite  satisfied  with  the  inference  which  he  had 

1  Did  space  permit,  this  would  be  the  place  to  refer  to  the  latest  glori* 
tication  of  the  doctrine  of  rent,  which  is  to  be  found  in  Clark's  Distribution 
of  Wealth,  published  in  1899.  In  that  work,  upon  the  strength  of  which 
the  author  enjoys  a  well-deserved  reputation,  revenues  of  various  kinds  are 
successively  treated  as  rents.  Imagine  a  fixed  amount  of  capital  applied 
along  with  successive  doses  of  labour :  each  new  dose  of  labour  will  produce 
less  than  the  preceding  one,  while  the  production  of  the  last  dose  regulates 
the  remuneration  of  all  the  rest.  But  the  product  of  the  preceding  doses  is 
greater  than  that  of  the  last,  and  a  surplus  value  will  be  produced  which  will 
represent  the  product  of  capital  and  which  will  be  exactly  analogous  to  rent. 
Or  suppose,  on  the  other  hand,  that  the  quantity  of  labour  is  fixed  and  applied 
along  with  successive  doses  of  capital ;  the  productivity  of  the  latter  will  in 
this  case  go  on  decreasing,  and  since  the  revenue  of  each  dose  will  be  propor- 
tionate to  its  productivity,  any  surplus  left  over  will  be  of  the  nature  of  rent 
due  to  labour.  There  are  other  ingenious  discussions  which  cannot  be  referred 
to  in  a  note  of  this  kind.  But  in  our  opinion  the  theory  of  economic  equilibrium 
affords  a  simpler  explanation  of  distribution,  and  the  kind  of  optimism  to  which 
Clark's  theory  gives  rise  seems  hardly  justified.  His  attempt  to  combine  the 
idea  of  marginal  productivity  with  the  law  of  diminishing  returns  is  a  further 
proof  of  the  persistent  influence  exerted  by  Ricardian  ideas  upon  English- 
speaking  economists. 


UNEARNED  INCREMENT  559 

drawn  from  it  in  support  of  the  free  importation  of  corn,  and  did 
not  feel  called  upon  to  defend  the  rent  of  land  any  more  than  the 
interest  of  capital,  both  of  which  seemed  inseparable  from  a  concep- 
tion of  private  property. 

Other  writers  proved  more  exacting.  Despite  the  numerous 
exceptions  met  with  in  actual  life,  the  feeling  that  all  forms  of 
revenue  ought  to  be  justified  by  some  kind  of  personal  effort  on  the 
part  of  the  beneficiary  is  fairly  deeply  rooted  in  our  moral  nature. 
But  according  to  the  Ricardian  theory  the  rent  of  land  is  a  kind  of 
income  got  without  corresponding  toil — a  reward  without  merit, 
and  as  such  it  is  unjust.  Such  seems  to  be  the  logical  conclusion  of 
the  Ricardian  thesis. 

The  conclusion  thus  established  is  further  confirmed  by  the 
natural  feeling  that  not  only  is  rent  unjust,  but  the  whole  institution 
of  private  property  as  well.  This  feeling  is  one  which  all  of  us 
share  (except  those  fortunate  individuals  who  happen  to  be  land- 
lords, perhaps  !),  and  is,  of  course,  much  older  than  any  doctrine 
of  rent.  Movable  property  is  generally  the  personal  creation  of 
man,  the  result  of  the  toil  or  the  product  of  the  savings,  if  not  of  the 
present  possessor',  at  least  of  a  former  one.  But  land  is  a  gift  of 
nature,  a  bountiful  creation  of  Providence  placed  at  the  disposal 
of  everyone  without  distinction  of  wealth  or  of  station.  Proudhon's 
celebrated  dictum  is  known  to  most  people :  "  Who  made  the  land  ? 
God.  Get  thee  hence,  then,  proprietor."  l  That  line  of  argument 
is  really  very  old,  and  Ricardo  unwittingly  gave  it  new  strength. 

The  idea  of  a  natural  right  to  the  land  and  of  a  common  interest 
in  it  is  the  instinctive  possession  of  every  nation.  But  in  England 
the  feeling  seems  more  general  than  elsewhere,  because,  possibly,  of 
the  number  of  large  proprietors  and  of  the  serious  abuses  to  which 
the  system  has  given  rise.  It  seems  rooted  in  the  legal  traditions 
of  the  nations.  "  No  absolute  ownership  of  land,"  writes  Sir 
Frederick  Pollock,  "  is  recognised  by  our  law-books  except  in  the 
Crown.  All  lands  are  supposed  to  be  held,  immediately  or  mediately, 
of  the  Crown,  though  no  rent  or  services  may  be  payable,  and  no 
grant  from  the  Crown  on  record."  a  Even  as  far  back  as  the 
seventeenth  century,  Locke,  in  his  work  On  Civil  Government,  had 
ventured  to  declare  that  God  had  given  the  land  as  common 
property  to  the  children  of  men. 

As  one  approaches  the  end  of  the  eighteenth  century  the  demands 
that  all  lands  unlawfully  taken  from  the  public  should  be  again 

1  Proudhon,  Qu'est-ce  que  la  Propritii,  p.  74. 
•  Pollock.  The  Land  Laws,  p.  12. 


560  THE  THEORY  OF  RENT 

restored  to  it  become  much  more  frequent.  Sometimes  the  demand 
is  put  forward  by  otherwise  obscure  writers,  but  occasionally  it 
finds  support  in  distinguished  and  influential  quarters.  In  1775 
a  Newcastle  schoolmaster  of  the  name  of  Thomas  Spence,  in  the 
course  of  a  lecture  given  before  the  Philosophical  Society  of  that 
town,  proposed  that  the  parishes  should  again  seize  hold  of  the  land 
within  their  own  area.  Thereupon  he  was  obliged  to  flee  to  London, 
where  he  carried  on  an  active  propaganda  in  support  of  these  ideas, 
achieving  a  certain  measure  of  success.  In  1781  a  distinguished 
professor  of  the  University  of  Aberdeen  of  the  name  of  Ogilvie  pub- 
lished an  anonymous  essay  on  the  rights  of  landed  proprietorship, 
wherein  confiscation  was  proposed  by  taxing  the  whole  of  the  value 
of  the  soil  which  was  not  due  to  improvements  effected  by  pro- 
prietors. But  little  notice  was  taken  of  his  suggestions,  despite  the 
fact  that  they  had  won  the  approval  of  Reid  the  philosopher.  Tom 
Paine,  in  a  pamphlet  published  in  1797,  gave  expression  to  similar 
ideas,1  and  the  same  views  were  put  forward  in  a  book  published  in 
1850  by  a  certain  Patrick  Edward  Dove.2  The  following  year 
Herbert  Spencer,  in  his  book  Social  Statics,  claimed  that  the  State  in 
taking  back  the  land  would  be  "  acting  in  the  interests  of  the  highest 
type  of  civilisation  "  and  in  perfect  conformity  with  the  moral  law. 
It  is  true  that  in  a  subsequent  work  he  took  pains  to  point  out  that 
all  that  can  be  claimed  for  the  community  is  the  surface  of  the 
country  in  its  original  unsubdued  state.  "  To  all  that  value  given  to 
it  by  clearing,  making  up,  prolonged  culture,  fencing,  draining, 
making  roads,  farm  buildings,  etc.,  constituting  nearly  all  its  value, 
the  community  has  no  claim."  8  But  despite  this  reservation  the 
justice  of  the  general  principle  is  clearly  recognised  by  him. 

Other  communities  besides  England  have  put  forward  a  similar 
demand.  Not  to  mention  the  claims  made  by  socialists  like 
Proudhon  and  the  Belgian  Baron  Colins,  and  Christian  Socialists 
like  Francois  Huet,  we  find  that  a  similar  method  of  procedure  is 
advocated  by  philosophers  like  Renouvier,  Fouillee,  and  Secretan. 
Some  of  them  even  go  the  length  of  claiming  compensation  for  the 
loss  which  this  usurpation  has  involved  to  the  present  generation. 

Thus,  a  conception  that  was  already  ancient  even  when  the 

*  Agrarian  Justice  opposed  to  Agrarian  Law  and  Agrarian  Monopoly. 

1  The  Theory  of  Human  Progression  and  Natural  Probability  of  a  Reign  of 
Justice.  For  further  information  concerning  Spence,  Ogilvie,  Dove,  Paine,  etc., 
see  Escarra's  Nationalisation  du  Sol  et  Socialisms  (Paris,  1904).  We  have  drawn 
upon  bis  book  for  the  views  here  put  forward,  the  works  of  these  writers  not 
being  easily  accessible, 

•  Justice,  p.  92. 


UNEARNED  INCREMENT  561 

law  of  rent  was  first  formulated  proclaimed  the  inalienable  right 
of  man  to  the  soil  and  demanded  the  re-establishment  of  that  right. 
We  shall  hear  an  echo  of  that  ancient  belief  in  all  the  advocates  of 
land  nationalisation,  in  Stuart  Mill,  Wallace,  Henry  George,  and 
Walras  :  1  and  this  is  one  of  the  many  links  that  bind  them  to  those 
earlier  writers.  Gossen  is  a  solitary  exception. 

But  a  simple  pronouncement  on  the  illegality  of  property  does 
not  take  us  very  far.  Appropriation  of  public  property  for  private 
purposes  is  undoubtedly  a  great  injustice,  but  the  transaction  is 
so  old  that  retribution  would  serve  little  useful  purpose,  and  the 
authors,  were  they  still  alive,  would  be  safely  ensconced  behind 
their  prescriptive  rights.  Moreover,  most  of  the  present  proprietors, 
possibly  all  of  them,  cannot  be  accused  of  violent  theft.  They  have 
acquired  their  land  in  a  perfectly  regular  fashion,  giving  of  their  toil 
or  their  savings  in  exchange  for  it.  To  them  it  is  merely  an  instru- 
ment of  production,  and  their  possession  of  it  as  legally  justifiable 
as  the  ownership  of  a  machine  or  any  other  form  of  capital.  To 
take  it  away  from  them  without  some  indemnity  would  not  be  to 
repair  the  old  injustice,  but  to  create  a  new  one.  Hence  i'  is  that 
the  doctrine  of  the  right  of  the  community  to  the  land  had  little 
more  than  philosophic  interest  until  such  time  as  it  begot  a  new 
theory — the  theory  of  rent. 

What  the  Ricardian  theory  really  proves  is  the  accumulative 
nature  of  the  benefits  accruing  from  the  possession  of  land.  This 
spontaneous,  automatic  character  of  rent  makes  it  unique  :  to  no 
other  form  of  revenue  does  it  belong.  The  extension  of  cultivation, 
the  increase  of  population,  the  growing  demand  for  commodities, 
means  an  indefinite  progression  in  the  value  of  land.  The  interest, 
initiative,  and  intelligence  of  the  proprietor  are  of  no  account. 
Everything  depends  upon  the  development  of  the  social  environ- 
ment. This  value  which  is  created  by  the  community  should  also 
belong  to  it.  Just  as  the  landed  proprietors  in  times  past  filched 

1  "  The  land  ifl  the  original  heritage  of  the  whole  human  race,"  Bays  Mill 
in  hie  Dissertations  and  Discussions.  In  the  Principles,  Book  II,  chap.  2,  §  6, 
he  expresses  his  views  thns :  "The  essential  principle  of  property  being  to 
assure  to  all  persons  what  they  have  produced  by  their  labour  and  accumulated 
by  their  abstinence,  this  principle  cannot  apply  to  what  is  not  the  produce  of 
labour,  the  raw  material  of  the  earth."  Walras,  in  his  Theorie  de  la  Proprieti, 
in  the  Studes  d'Sconomie  sociale,  p.  218,  says  that  the  land  by  a  kind  of  natural 
right  is  the  property  of  the  State.  Henry  George,  in  Progress  and,  Poverty, 
Book  VII,  chap.  1,  maintains  that  "  the  equal  right  of  all  men  to  the  use  of  the 
land  is  as  clear  as  their  equal  right  to  breathe  the  air — it  is  a  right  proclaimed  by 
the  fact  of  their  existence." 


562  THE  THEORY  OF  RENT 

the  land,  so  they  to-day  absorb  this  income.  But  why  allow  this 
injustice  to  continue  ? 

*'  Suppose,"  says  Stuart  Mill,  "  that  there  is  a  kind  of  income 
which  constantly  tends  to  increase  without  any  exertion  or  sacrifice 
on  the  part  of  the  owners,  these  owners  constituting  a  class  in  the 
community  whom  the  natural  course  of  things  progressively  enriches 
consistently  with  complete  passiveness  on  their  own  part.  In  such 
a  case  it  would  be  no  violation  of  the  principles  on  which  private 
property  is  founded  if  the  State  should  appropriate  this  increase  of 
wealth,  or  part  of  it,  as  it  arises.  This  would  not  properly  be  taking 
anything  from  anybody ;  it  would  merely  be  applying  an  accession 
of  wealth  created  by  circumstances  to  the  benefit  of  society,  instead 
of  allowing  it  to  become  an  unearned  appendage  to  the  riches  of  a 
particular  class.  Now  this  is  actually  the  case  with  rent."  1  The 
argument  seems  quite  decisive.  At  any  rate,  Ricardo's  book  was 
hardly  out  of  the  press  before  the  demand  for  confiscation  was 
renewed. 

His  friend  James  Mill,  writing  in  1821,  claimed  that  the  State 
could  legitimately  appropriate  to  itself  not  only  the  present  rent  of 
land,  but  also  all  future  increments  of  the  same,  with  a  view  to 
compensating  for  public  expenditure.2  The  Saint-Simonians,  a 
little  later,  expressed  a  similar  view.8  But  it  was  James  Mill's 
son,  John  Stuart  Mill,  who  showed  the  warmest  attachment  to 
this  idea.  The  Principles  contains  a  general  outline  of  his  reform 
plan,  which  took  a  still  more  definite  shape  in  the  programme  of 
the  Land  Tenure  Reform  Association,  founded  in  1870,  and  in 
the  discussions  and  explanations  which  accompanied  it.* 

The  following  are  the  essential  points  :  (1)  The  State  will  only 
appropriate  for  its  own  use  the  future  rents  of  land  ;  that  is,  the 
rents  paid  after  the  proposed  reform  has  been  accomplished.  (2)  A 
practical  beginning  will  be  made  by  valuing  the  whole  of  the  land, 
and  a  periodical  revaluation  will  be  made  with  a  view  to  determining 
the  increase  in  its  value,  and  whether  such  increase  is  or  is  not  the 
result  of  communal  activity.  A  general  tax  would  transfer  this 

1  Principles,  Book  V,  chap.  2,  §  5. 

1  "  This  continual  increase  arising  from  the  circumstances  of  the  community 
and  from  nothing  in  which  the  landholders  themselves  have  any  peculiar  share, 
does  seem  a  fund  no  less  peculiarly  fitted  for  appropriation  to  the  purposes  of 
the  State  than  the  whole  of  the  rent  in  a  country  where  land  has  never  been 
appropriated."  (Elements  of  Political  Economy,  chap.  4,  §  5.) 

1  Cf.  supra,  chapter  on  Saint-Simon. 

•  Principles,  Book  V,  chap.  2,  §  5.  Cf.  also  chap.  3,  §§  2  and  6.  For  the 
programme  of  the  League  see  Dissertations  and  Discussions,  vol.  iv. 


UNEARNED  INCREMENT  563 

benefit  to  the  State.1  (8)  Should  any  proprietor  consider  himself 
unfairly  treated  the  State  would  give  him  the  option  of  paying  the 
new  tax  or  of  buying  back  the  property  at  the  price  obtainable  for 
it  had  he  determined  to  sell  just  when  the  reform  was  being 
brought  in. 

Mill  was  opposed  to  immediate  nationalisation.  Not  that  he 
thought  it  unjust';  on  the  contrary,  he  was  fully  convinced  of  its 
equity.  But  our  experience  of  State  administration  and  of  the  work 
of  municipal  bodies  did  not  seem  to  him  to  warrant  any  great  faith 
in  the  utility  of  any  such  measure.  He  was  afraid  that  "  many 
years  would  elapse  before  the  revenue  realised  for  the  State  would 
be  sufficient  to  pay  the  indemnity  which  would  be  justly  claimed  by 
the  dispossessed  proprietors."  * 

Nor  did  he  attempt  to  disguise  the  fact  that  the  financial  results 
would  in  his  opinion  be  somewhat  insignificant  and  the  scope  of  the 
reform  naturally  somewhat  limited.  A  few  years  only  were  to 
elapse  before  another  writer  proposed  a  much  more  radical  measure 
which  was  to  effect  a  veritable  social  revolution.  It  was  a  project 
to  abolish  poverty  and  to  secure  distributive  justice  that  Henry 
George  now  launched  on  the  strength  of  his  belief  in  the  doctrine  of 
rent. 

Henry  George  (1839-1897)  was  not  a  professional  economist. 
He  was  a  self-made,  self-taught  man  who  followed  a  variety  of 
occupations  before  he  finally  blossomed  forth  as  a  publicist.  At 
the  age  of  sixteen  he  went  to  sea,  and  led  a  roving  life  until  1861, 
when  he  settled  down  at  San  Francisco  as  a  compositor,  finally 
becoming  editor  of  a  daily  paper  in  that  city.  He  witnessed  the 
rapid  expansion  of  San  Francisco  and  the  development  of  the 
surrounding  districts  as  the  result  of  the  great  influx  of  gold-diggers. 
He  also  saw  something  of  the  agricultural  exploitation  of  the  western 
States.  The  enormous  increase  in  the  value  of  land  and  the  fever 
of  speculation  which  resulted  from  this  naturally  left  a  lasting 
impression  upon  him.  Progress  and  Poverty  (1879),  the  book  which 
established  his  fame,  is  wholly  inspired  by  these  ideas.  * 

1  Mill  thought  it  impossible  to  distinguish  in  individual  cases  between  the 
surplus  value  which  is  due  to  general  circumstances  and  the  surplus  that  results 
from  the  expenditure  undertaken  by  the  proprietor.  Hence  his  conclusion  that 
a  general  tax  was  the  most  equitable  method  of  procedure  with  a  view  to  effecting 
confiscation. 

1  Dissertations  and  Discussions,  rol.  iv,  p.  266. 

•  Progress  and  Poverty  was  not  his  first  effort,  however.  In  1871  Our  Land 
and  Land  Policy  had  appeared,  and  in  1874  The  Land  Question.  Later  still  he 
published  Protection  or  Free  Trade  (1886),  in  which  he  puts  forward  a  strong 


564  THE  THEORY  OF  RENT 

The  book  aroused  the  greatest  enthusiasm.  It  has  all  the  liveli- 
ness of  journalism  and  the  eloquence  of  oratory,  but  has  neither  the 
precision  nor  the  finality  of  a  work  of  science.  Its  economic  heresies, 
though  obvious  enough,  detracted  nothing  from  its  powerful  appeal, 
and  the  wonderful  setting  in  which  the  whole  problem  of  poverty 
was  placed  has  not  been  without  its  effect  even  upon  economists  j1 
nor  is  the  powerful  agitation  to  which  the  book  gave  rise  by  any 
means  extinct. 

It  seemed  to  Henry  George  that  landed  proprietors,  in  virtue 
of  the  monopoly  which  they  possess,  absorb  not  merely  a  part  but 
almost  the  whole  of  the  benefits  which  accrue  from  the  increase  of 
population  and  the  perfection  of  machinery.  The  progress  of 
civilisation  seems  helpless  to  narrow  the  breach  separating  the  rich 
from  the  poor.  While  rents  go  up  interest  goes  down  and  wages 
fall  to  a  minimum.  Every  country  presents  the  same  phenomena — 
extreme  poverty  at  one  end  of  the  scale  accompanied  by  extravagant 
luxury  at  the  other. 

Is  this  unhappy  result  a  kind  of  hybrid  begotten  of  the  Mal- 
thusian  law  and  the  law  of  diminishing  returns  ?  Must  we,  after  all, 
agree  with  Malthus,  Ricardo,  and  Mill  when  they  say  that  the  cause 
is  to  be  sought  in  the  increase  of  population  outrunning  the  means 
of  subsistence  ?  Henry  George  thinks  not,  for  experience  everywhere 
seems  to  show  that  the  rich  are  growing  in  numbers  much  more 
rapidly  than  the  growth  of  population  warrants,  and  that  organisa- 
tion is  really  performing  wonderful  feats  under  very  difficult  con- 
ditions.2 

Is  it  caused  by  the  exploitation  of  labour  by  capital,  as  the 
socialists  seem  to  think  ?  George  apparently  thinks  not,  for  the 
two  factors,  capital  and  labour,  seem  to  him  so  intimately  con- 
nected that  both  of  them  are  easily  exploited  by  the  landowners. 
Every  man,  he  thinks,  could  devote  his  energies  either  to  the  pro- 
duction of  capital  or  to  supplying  labour — capital  and  labour  being 
merely  different  manifestations  of  the  same  force,  human  effort. 
The  benefits  resulting  from  the  formation  of  capital  on  the  one 

case  for  Free  Trade,  and  in  1891  An  Open  Letter  to  Pope  Leo  XIII  on  the  con- 
dition of  the  workers. 

1  Clark  in  his  Distribution  of  Wealth  states  that  the  method  by  which  he 
tries  to  determine  the  exact  productivity  of  each  factor  of  production  is  one 
that  he  borrowed  from  Henry  George. 

*  "  Twenty  men  working  together  will,  where  nature  is  niggardly,  produce 
more  than  twenty  times  the  wealth  that  one  man  can  produce  where  nature 
is  most  bountiful."  Of.  also  the  whole  of  Book  II,  which  is  a  disproof  of  the 
Maithusian  theory. 


UNEARNED  INCREMENT  565 

hand  and  from  the  exercise  of  labour  on  the  other  tend  to  be  equal, 
and  any  inequality  is  immediately  counteracted  by  a  larger  produc- 
tion of  one  or  other  of  these  two  factors,  with  the  result  that  equili- 
brium is  soon  re-established.  The  rate  of  interest  and  the  rate  of 
wages  can  never  vary  inversely.1 

But  if  we  can  neither  accuse  over-population  nor  lay  the  blame 
at  the  door  of  exploitation,  how  are  we  to  account  for  the  fact  that 
the  labourer  is  still  so  miserably  paid  ?  It  is  entirely,  he  thinks,  the 
result  of  rent.  Hitherto  exceedingly  severe  in  his  handling  of 
some  Ricardian  theories,  George  has  no  hesitation  in  pushing  the 
doctrine  of  rent  to  its  extreme  limits. 

He  points  out  that  owing  to  the  existence  of  competition  between 
capital  and  labour  the  rates  of  interest  and  wages  are  determined 
by  the  yield  of  that  capital  and  labour  when  applied  to  land  on 
the  margin  of  cultivation — that  is,  to  land  that  yields  no  surplus 
or  rent.  And  in  virtue  of  the  natural  monopoly  which  landowners 
possess  they  can  exact  for  the  use  of  other  lands  any  amount  they 
like  beyond  this  minimum.  The  result  is  that  rent  goes  on  gradually 
increasing  as  the  limits  of  cultivation  extend.  As  population 
grows  and  needs  become  more  extensive  and  varied,  as  technical 
processes  become  more  perfect  and  labour  becomes  less  and  less 
necessary,  new  lands  are  brought  under  cultivation,  such  lands 
being  generally  of  an  inferior  character.  The  result  is  that  the 
lands  which  were  previously  cultivated  will  always  yield  a  rent 
to  the  proprietor.  Thus  the  progress  of  civilisation,  whatever 
form  it  take,  always  tends  to  the  same  result — a  higher  rent  for  the 
benefit  of  the  landed  proprietor.* 

1  "  Labour  and  capital  are  but  different  forms  of  the  same  thing — human 
exertion.  Capital  is  produced  by  labour  ;  it  is,  in  fact,  but  labour  impressed 
upon  matter.  .  .  .  The  use  of  capital  in  production  is,  therefore,  but  a  mode 
of  labour.  .  .  .  Hence  the  principle  that,  under  circumstances  which  permit  free 
competition,  operates  to  bring  wages  to  a  common  standard  and  profits  to  a 
substantial  equality — the  principle  that  men  will  seek  to  gratify  their  desires 
with  the  least  exertion — operates  to  establish  and  maintain  this  equilibrium 
between  wages  and  -interest.  .  .  .  And  this  relation  fixed,  it  is  evident  that 
interest  and  wages  must  rise  and  fall  together,  and  that  interest  cannot  be 
increased  without  increasing  wages,  nor  wages  be  lowered  without  depressing 
interest."  (Progress  and  Poverty,  Book  III,  chap.  5.)  It  is  hardly  necessary 
to  point  out  how  very  much  simplified  this  doctrine  concerning  the  relation 
between  wages  and  interest  really  is. 

1  A  rtsumi  of  this  theory  of  distribution,  whose  very  simplicity  most  make 
it  suspect,  may  be  found  in  Book  V,  chap.  2  :  "  In  every  direction,  the  direct 
tendency  of  advancing  civilisation  is  to  increase  the  power  of  human  labour 
to  satisfy  human  desires — to  extirpate  poverty  and  to  banish  want  and  the 
fear  of  want.  .  .  .  But  labour  cannot  reap  the  benefits  which  advancing 


566  THE  THEORY  OF  RENT 

"  Here  is  a  little  village ;  in  ten  years  it  will  be  a  great  city— • 
in  ten  years  the  railroad  will  have  taken  the  place  of  the  stage- 
coach, the  electric  light  of  the  candle ;  it  will  abound  with  all  the 
machinery  and  improvements  that  so  enormously  multiply  the  effec- 
tive power  of  labour.  Will,  in  ten  years,  interest  be  any  higher  ?  " 
He  will  tell  you  "  No  !  "  "  Will  the  wages  of  common  labour  be 
any  higher  ?  "  He  will  tell  you  "  No  1  "  "  What,  then,  will  be 
higher  ?  "  "  Rent :  the  value  of  land.  Go,  get  yourself  a  piece  of 
ground,  and  hold  possession.  .  .  .  You  may  sit  down  and  smoke 
your  pipe ;  you  may  lie  around  like  the  lazzaroni  of  Naples  or  the 
lepers  of  Mexico ;  you  may  go  up  in  a  balloon  or  down  a  hole  in 
the  ground  ;  and  without  doing  one  stroke  of  work,  without  adding 
one  iota  to  the  wealth  of  the  community,  in  ten  years  you  will 
be  rich  1  In  the  new  city  you  may  have  a  luxurious  mansion ; 
but  among  its  public  buildings  will  be  an  almshouse."  1 

Accordingly  Henry  George  regards  rent  not  so  much  as  a  species 
of  revenue  which,  as  Stuart  Mill  saw,  is  particularly  easy  to  absorb 
by  means  of  taxation,  but  as  the  very  source  of  all  evil.  Once 
get  rid  of  rent,  poverty  will  be  banished,  inequality  of  wealth  will 
be  removed,  and  economic  crises — which  George  thought  were 
the  result  of  speculation  in  land — will  no  longer  disturb  the  serenity 
of  commercial  life.  But  it  is  hardly  enough  to  aim  at  the  future 

civilisation  thus  brings,  because  they  are  intercepted.  Land  being  necessary  to 
labour,  and  being  reduced  to  private  ownership,  every  increase  in  the  productive 
power  of  labour  but  increases  rent — the  price  that  labour  must  pay  for  the 
opportunity  to  utilise  its  power ;  and  thus  all  the  advantages  gained  by  the 
march  of  progress  go  to  the  owners  of  land,  and  wages  do  not  increase." 
George,  however,  does  not  claim  that  real  wages  have  fallen  because  technical 
improvements  enable  production  to  be  carried  on  where  it  was  formerly  impos- 
sible. At  most  this  will  only  enable  capital  and  labour  to  preserve  their  old 
scale  of  remuneration ;  it  will  not  give  them  any  share  in  the  progress  that 
has  been  made,  so  that,  relatively  speaking,  it  is  true  to  say  that  wages  and 
interest  have  both  fallen  in  comparison  with  rent.  "  When  I  say  that  wages 
fall  as  rent  rises,  I  do  not  mean  that  the  quantity  of  wealth  obtained  by  labourers 
as  wages  is  necessarily  less,  but  that  the  proportion  which  it  bears  to  the  whole 
produce  is  necessarily  less.  The  proportion  may  diminish  while  the  quantity 
remains  the  same,  or  even  increases."  (Book  VI,  chap.  6.  Cf.  also  Book  IV, 
chap.  3.)  George,  like  Ricardoand  a  good  many  socialists,  confuses  two  different 
problems,  namely,  the  price  of  productive  services  and  the  proportional  dis- 
tribution of  the  product  between  the  different  agents  of  production  (Book  V). 
He  adds,  however,  that  scientific  discovery,  by  pushing  the  margin  of  culti- 
vation back  to  that  point  where  the  law  of  diminishing  returns  is  more  than 
counterbalanced  by  increased  productive  efficiency,  may  even  sometimes  reduce 
the  worker's  real  wages,  and  so  impair  hia  position  not  only  relatively,  but  also 
absolutely.  (Book  IV,  chap.  4.) 
»  Ibid.,  Book  V,  chap.  2. 


UNEARNED  INCREMENT  567 

increments  of  rent,  for  the  damning  consequences  of  privilege  would 
still  remain  if  landowners  were  allowed  to  retain  even  their  present 
rents.  The  whole  abomination  must  be  taxed  out  of  existence.1 
Such  a  tax  would  yield  sufficient  to  defray  all  State  expenditure, 
and  other  forms  of  taxation  could  then  be  dispensed  with.  In  the 
single  tax  advocated  by  Henry  George  we  have  a  curious  revival  of 
the  Physiocrats'  impot  unique. 

George's  system  is  open  to  serious  criticism  both  from  the 
economic  and  from  the  ethical  standpoint.  From  the  economic 
point  of  view  it  is  obvious  that  the  right  of  private  property  does 
confer  upon  the  proprietor  the  right  to  such  benefit  as  may  accrue 
from  a  possible  surplus  value,  but  it  is  not  at  all  clear — nor  has 
George  succeeded  in  proving  it — that  such  a  right  absorbs  the  whole 
benefit  which  accrues  from  social  progress.  Besides,  it  seems  rather 
childish  to  think  that  rent  is  the  sole  cause  of  poverty  and  that  its 
confiscation  would  result  in  the  removal  of  the  evils  of  poverty. 

From  the  point  of  view  of  equity  it  seems  clear  that  George  in 
removing  one  injustice  is  at  the  same  time  creating  another.  To  rob 
the  present  proprietors  of  the  rents  which  they  draw  is  simply  to 
deprive  them  of  advantages  which  many  of  them  have  acquired 
either  by  means  of  labour  or  economy.  Land  is  no  longer  acquired 
merely  by  occupation :  the  usual  way  of  getting  hold  of  it  to-day 
is  to  buy  it.  And  if  we  consider  that  such  a  transaction  is  just, 
we  are  bound  to  recognise  the  legitimacy  of  rent  just  as  much  as 
the  interest  of  capital.  Confiscation  might  be  justified  in  the  case 
of  those  who  first  unlawfully  occupied  the  land.  But  how  many 
of  them  are  left  now  ? 

Further,  if  we  are  going  to  relieve  the  landowner  of  the  rent 
which  results  from  the  progress  of  civilisation,  we  ought  to  indemnify 
him  for  any  "  decrement  "  which  may  have  resulted  through  no 
error  of  his.  Stuart  Mill  anticipated  this  objection  2  and  gave  the 
dissatisfied  proprietor  the  option  of  selling  his  land  at  a  price  equal 
to  its  market  value  at  the  time  when  the  reform  was  inaugurated.3 

1  That  portion  of  their  revenue  which  represented  the  capital  sunk  in  the 
land  would  still  be  the  property  of  the  landowners. 

*  Mill  points  out  that  the  answer  to  this  objection  is  that  the  right  of  selling 
the  land  at  a  price  which  depends  upon  two  contrary  conditions  (gain  or  loss) 
establishes  a  kind  of  equilibrium.  The  State  would  not  lose  anything  by  this, 
for  a  fall  in  value  in  one  place,  unless  it  be  accompanied  by  a  general  want  of 
prosperity,  implies  a  corresponding  increase  somewhere  else,  of  which  the  State 
will  get  the  benefit.  (Dissertations  and  Discussions,  vol.  iv.) 

1  M.  Einaudi,  however,  in  his  excellent  Studi  iugli  effetti  ddle  imposte,  p.  125 
(Turin,  1902),  remarks  that  this  principle  of  indemnifying  losses  leads  directly 
to  a  S'tate  guarantee  of  values — the  expediency  of  which  is  at  least  problematic. 


568  THE  THEORY  OF  RENT 

Henry  George  apparently  never  faced  this  aspect  of  the  question, 
He  thought  that  "  decrement "  would  be  very  exceptional  indeed, 
and  that  the  persistence  of  increment  values  is  as  thoroughly  estab- 
lished as  any  law  in  the  physical  world  ever  was. 

Mill's  system,  though  much  more  moderate  than  George's,  is 
by  no  means  beyond  reproach.  The  common  element  in  both 
systems — i.e.  the  emphasis  laid  upon  unearned  increments — has 
been  criticised  both  by  socialists  and  economists. 

The  socialists  point  out  that  if  the  object  is  to  get  rid  of  unearned 
incomes  the  interest  of  capital  as  well  as  the  rent  of  land  ought  to 
be  confiscated.  While  agreeing  with  the  object,  they  claim  that 
they  are  more  logical  in  demanding  the  extinction  of  both  kinds. 
But  this  criticism  is  not  quite  a  complete  answer  to  Mill  and  his 
supporters,  for  the  latter  regarded  interest  as  the  legitimate  remu- 
neration, if  not  of  the  labour,  at  least  of  the  abstinence  of  the  capi- 
talist. Interest  is  the  remuneration  of  sacrifice.1  But  the  socialists 
are  not  convinced.  They  cannot  see  how  the  negative  effort  of  the 
capitalist  is  to  be  compared  with  the  positive  effort  of  the  labourer, 
and  they  have  not  been  sparing  in  their  denunciation  of  Mill  and 
his  followers. 

The  economists  adopt  a  different  line  of  criticism.  The  argument 
is  that  the  rent  of  land  is  illegal  because  the  progress  of  society  has 
contributed  more  to  it  than  the  work  of  the  proprietor.  But  is 
there  any  kind  of  revenue  which  is  altogether  free  from  such  criti- 
cism ?  Every  kind  of  revenue  contains  some  elements  that  are 
essentially  social  in  character ;  that  is,  elements  that  depend  entirely 
upon  the  demands  of  society.  The  growth  of  social  demand  often 
brings  to  capital  as  well  as  to  land,  to  labour  as  well  as  to  capital, 
quite  unexpected  and  occasionally  extravagant  incomes.  Has  not 
political  economy  in  the  course  of  its  development  been  forced 
to  recognise  the  existence  of  a  whole  series  of  rents  differing  from 
the  rent  of  land  merely  in  respect  of  their  shorter  duration  ?  Was 

He  makes  the  further  observation  that  the  compensation  would  often  be  paid 
to  a  person  other  than  the  one  who  paid  the  tax  when  it  was  levied — the  property 
in  the  meantime  having  changed  hands. 

1  For  the  distinction  between  the  legality  of  movable  and  immovable  property 
see  Mill,  Principles.,  Book  II,  chap.  2,  §  1,  and  Henry  George,  Progress  and  Poverty, 
Book  VII,  chap.  1.  "  The  institution  of  private  property,"  says  Mill  in  the 
above  passage,  "  when  limited  to  its  essential  elements,  consists  in  the  recognition, 
in  each  person,  of  a  right  to  the  exclusive  disposal  of  what  he  or  she  have  pro- 
duced by  their  own  efforts,  or  received  either  by  gift  or  by  fair  agreement  without 
force  or  fraud  from  those  who  produced  it."  Such  a  definition  at  least  implies 
that  lauded  property  is  illegal.  A  house  is  distinguished  from  the  land  upon 
which  it  is  built ;  whereas  the  former  is  legally  held  the  latter  is  not. 


UNEARNED  INCREMENT  569 

the  fortune  of  the  celebrated  hunchback  of  Quincampoix  Street, 
who  li ved  in  the  glorious  days  of  Law's  system,  in  any  way  different 
from  the  fortune  of  the  Duke  of  Westminster,  who  owns  large  areas 
of  the  city  of  London  ?  Or  is  the  surplus  value  conferred  upon  old 
capital  by  a  mere  fall  in  the  rate  of  interest  in  any  respect  different 
from  the  surplus  value  acquired  by  land  under  the  pressure  of 
growing  population  ?  The  most  striking  thing,  apparently,  about 
unearned  increment  is  its  ubiquity.  Society,  presumably,  does 
not  distribute  its  revenues  in  the  way  a  schoolmaster  rewards  the 
most  painstaking  or  the  most  meritorious  pupil.  It  puts  a  premium 
upon  the  services  that  are  rarest,  but  never  inquires  whether  they 
involved  any  greater  amount  of  sacrifice.  Such  premiums  simply 
denote  the  intensity  of  its  own  demands.  What  right  have  we 
to  isolate  one  of  these  and  demand  that  it  and  it  alone  shall  be 
confiscated  ? 

Stuart  Mill  has  given  the  only  reply  that  is  possible  by  showing 
that  none  of  the  other  rents  has  either  the  persistence  or  the  gene- 
rality of  the  rent  of  land.1  That  reply  seems  clear  enough  to  justify 
at  least  a  partial  application  of  the  systems  of  Henry  George  and 
Stuart  Mill. 

About  the  year  1880  several  leagues  were  founded  in  England, 
America,  and  Australia  with  a  view  to  propagating  what  George's 
followers  call  his  "  sublime  truths."  During  the  last  few  years 
they  have  not  been  nearly  so  active,  although  several  attempts  have 
since  been  made,  especially  by  municipalities,  to  tax  surplus  values.' 
Even  as  far  back  as  1807  a  law  was  passed  in  France  requiring 
riparian  owners  to  pay  compensation  in  cases  where  their  estates 
bordered  upon  public  works  which  in  any  way  contributed  to  the 
greater  value  of  the  property.  But  the  law  is  very  seldom  enforced.3 

1  Mill,  Dissertations  and  Discussions,  vol.  iv,  p.  298. 

*  Especially  in  England,  where  various  schemes  have  been  propounded  and 
investigated  by  Royal  Commissions  in  the  course  of  the  last  ten  years.  Such 
schemes  are  discussed  in  a  very  thorough  fashion  in  Einaudi's  book  already 
mentioned,  and  in  an  article  entitled  Recent  Schemes  for  Rating  Urban  Land 
Values  contributed  by  Edgeworth  to  the  Economic  Journal  in  1906. 

»  Article  30  of  the  Act  of  September  16,  1807,  runs  as  follows :  "  If  as  the 
result  of  the  improvements  already  mentioned  in  this  Act — through  the  making 
of  new  roads  or  the  laying  out  of  new  squares,  through  the  construction  of  quays 
or  other  public  works — any  private  property  acquires  a  notable  increase  in 
value,  such  property  shall  be  made  to  pay  an  indemnity  which  may  be  equal  to 
half  the  value  of  the  advantage  which  has  thus  accrued  to  it."  The  principle  was 
rarely  applied,  however.  M.  Berth&emy  (Traiti  ilementaire  de  Droit  adminis- 
tratif,  1908,  p.  624)  states  that  he  can  only  find  twenty  occasions  on  whwh  the 
law  was  brought  into  operation  in  the  whole  course  of  the  nineteenth  century. 
E.D.  T 


570  THE  THEORY  OF  RENT 

In  London  the  principle  was  recognised  as  far  back  as  the  seven- 
teenth century,  but  has  long  since  fallen  into  desuetude.1  The 
idea  is  again  gaining  ground  very  rapidly,  in  England  and  Germany 
especially.  Numerous  projects  have  been  launched  with  a  view  to 
taxing  the  surplus  value  of  urban  lands  not  used  for  building  pur- 
poses, and  some  of  the  schemes  have  been  fairly  successful.  The 
adoption  of  this  principle  was  one  of  the  more  prominent  features 
of  the  famous  English  Budget  of  1909,  which  roused  so  much  oppo- 
sition and  brought  the  long  constitutional  struggle  between  the 
Liberal  Government  and  the  House  of  Lords  to  a  head.  The  econo- 
mists are  still  divided  on  the  question.  The  imposition  of  a  Werth- 
zuwachssteuer  by  certain  German  municipalities  led  to  a  fresh  dis- 
cussion of  the  topic  in  a  number  of  reviews  and  polemical  works, 
but  the  principle  stands  enshrined  in  the  German  Imperial  Act  of 
1911. 

These  ideas  have  never  obtained  the  same  hold  in  France,  where 
property  is  subdivided  to  a  much  greater  extent  than  it  is  in  England, 
and  where  rent  is  accordingly  distributed  among  a  greater  number 
of  cultivators  and  naturally  raises  less  opposition.  In  addition  to 
this,  the  slow  growth  of  the  population  in  France  makes  the  problem 
less  acute  than  it  is  in  Germany,  where  the  workers  find  that  an 
increasing  proportion  of  wages  is  absorbed  in  the  payment  of  rent. 
But  the  question  will  demand  attention  sooner  or  later,  and  France, 
like  other  countries,  will  have  to  look  for  an  answer. 


Ill :  SYSTEMS  OF  LAND  NATIONALISATION 

THE  "  land -nationalises,"  whose  schemes  now  come  under  con- 
sideration, not  content  with  the  taxation  of  a  part  of  the  revenue 
of  the  land,  demand  that  the  whole  of  it  should  again  become  the 
property  of  the  State. 

Apparently  a  much  more  thoroughgoing  suggestion  than  any 
of  the  preceding  ones,  especially  Mill's,  in  reality  it  is  a  much  simpler 
system  that  is  proposed.  The  advocates  of  land  nationalisation 
think,  with  Mill,  that  the  surplus  value  of  the  land  should  be  reserved 
for  the  State,  and,  like  him,  they  have  great  faith  in  the  persistence 

1  Professor  Seligman  (Essays  in  Taxation,  6th  ed.,  p.  341)  quotes  an  English 
law  of  1672  relating  to  the  widening  of  certain  streets  in  Westminster  in  which 
the  principle  is  neatly  stated.  But  when  it  was  proposed  to  apply  it  to  certain 
public  works  undertaken  in  London  in  1890  it  was  energetically  opposed.  It 
was  admitted  afresh  in  the  Tower  Bridge  Act  of  1895.  A  similar  system  is 
frequently  adopted  in  America  under  the  name  of  "  special  assessment "  01 
"  betterTnent." 


SYSTEMS  OF  LAND  NATIONALISATION          571 

and  continuity  of  this  surplus  value.  They  also  agree  with  him 
when  he  puts  forward  the  claim  of  society  to  the  possession  of  the 
soil,  but  they  never  suggest  that  it  should  be  taken  from  its  present 
owners.  They  reject  the  distinction  between  earned  and  unearned 
income  and  consider  that  they  are  both  equally  legitimate.  But, 
unlike  Mill,  they  never  feel  that  they  can  say  to  the  landed  pro- 
prietor, "  Thus  far  and  no  farther."  Appropriation  is  advocated 
simply  on  the  ground  of  its  public  utility,  and  care  is  taken  to  hedge 
it  round  with  all  kinds  of  guarantees.  Proprietors  are  to  be 
indemnified  not  merely  for  the  loss  of  income  it  would  immediately 
involve,  but  also  for  the  loss  of  any  future  revenue  upon  which  they 
had  reckoned.  Could  anything  be  simpler  or  more  reasonable  ? 

The  practical  interest  of  a  ^ystem  of  this  kind  obviously  cannot 
be  very  great.  Such  a  fundamental  change  in  the  institution  of 
private  property,  especially  in  old  countries,  could  only  be  accom- 
plished by  means  of  a  revolution.  Revolutions  are  to  be  undertaken 
in  no  light-hearted  fashion,  and  never  without  tke  sanction  of  absolute 
necessity.  Curiously  enough,  all  the  changes  made  in  France,  for 
example,  since  the  Revolution,  in  Russia  since  the  emancipation  of 
the  serfs,  and  in  Ireland  during  the  last  hundred  years  have 
been  in  the  opposite  direction.  They  have  extended  rather  than 
contracted  the  area  of  private  property.  Russia  at  the  present 
moment  is  engaged  in  this  very  task.  The  prospects  of  nationalisa- 
tion are  certainly  not  very  rosy.  New  countries  may  perhaps  prove 
more  favourable  grounds  for  experiment :  there  the  State  may 
possibly  show  itself  more  jealous  of  its  rights.  But  as  a  matter  of 
fact  it  is  just  in  those  countries  that  the  State  is  most  reckless, 
the  reason  undoubtedly  being  that  the  abuses  of  private  property 
have  not  yet  had  time  to  make  their  influence  felt. 

The  extremely  hypothetical  character  of  the  schemes  now  under 
consideration  relieves  us  of  the  necessity  of  examining  their  organisa- 
tion in  any  detail,  although  this  question  of  the  minutise  is  apparently 
one  that  strongly  appeals  to  the  creative  instinct  of  these  Utopians. 

Of  greater  interest  are  the  grounds  on  which  they  base  their 
demand  and  the  economic  processes  by  means  of  which  they  hope 
to  accomplish  their  aims.  From  this  point  of  view  the  most  interest- 
ing systems  are  those  of  Gossen  and  Walras.  Gossen's  scheme  is 
expounded  in  a  curious  volume  entitled  Entwickelung  der  Gesetze 
des  menschlichen  Verkehra,  and  Walras's  is  developed  in  a  memo- 
randum addressed  by  the  author  to  the  Vaudoise  Society  of  Natural 
Sciences  in  1880.  Both  works  contain  ideas  from  which  the 
economist  may  learn  a  good  deal,  and  both  writers  claim  that  the 


572  THE  THEORY  OF  RENT 

successful  adoption  of  their  schemes  would  enable  the  State  to  make 
an  offer  of  free  land  to  all  citizens. 

(a)  Gossen's  book  appeared  in  1853.1  It  is  a  curious  coincidence 
that  the  French  Bastiat,  the  American  Carey,  and  the  German 
Gossen  should  all  be  engaged  in  developing  an  optimistic  thesis 
just  about  the  same  time.  Of  the  three,  Gossen's  was  the  most  opti- 
mistic and  by  far  the  most  scientific.  He  concurred  in  the  judgment 
of  the  Physiocrats,  who  believed  that  the  world  was  providentially 
subjected  to  the  action  of  beneficent  laws  which  men  must  know 
and  obey  if  they  are  ever  to  become  happy.  Such,  he  thought,  are 
the  laws  of  enjoyment,  or  of  utility  or  ophelimity,  as  we  call  them 
to-day.  A  person  who  merely  follows  his  own  interests  finds  that 
unconsciously,  perhaps,  he  has  been  contributing  to  the  happiness  of 
the  whole  of  society.  Gossen  gives  a  remarkably  clear  proof  of  the 
theory  of  maximum  ophelimity,  based  upon  a  very  ingenious  analysis 
of  wants.  According  to  this  theory,  every  individual  who  pursues 
the  satisfaction  of  his  own  desires  under  a  regime  of  free  competition 
helps  in  the  realisation  of  the  maximum  satisfaction  by  everybody 
concerned. 

If  it  be  true  that  each  individual  in  pursuit  of  personal  enjoy- 
ment unwittingly  contributes  to  the  well-being  of  the  whole  com- 
munity, it  is  clear  that  everyone  ought  to  be  given  the  utmost 
possible  freedom  in  the  pursuit  of  his  interests.  But  there  are 
two  great  obstacles  in  the  way  of  this.  The  first  of  these  is  want  of 
capital,  which  Gossen  thought  could  be  obviated  by  creating  a  huge 
Government  bank  which  would  lend  capital  whenever  required. 
The  mechanism  of  the  bank  is  described  in  considerable  detail. 
The  second  obstacle  is  the  existence  of  private  property  in  land. 
If  man  is  to  develop  all  his  faculties  and  to  use  them  to  their 
utmost  extent  in  the  production  of  wealth,  he  must  be  allowed  to 
choose  his  work  freely  and  to  carry  it  on  under  the  most  advan- 
tageous circumstances  possible.  But  private  property  hinders 
free  choice.  "  Thanks  to  this  one  fact,"  says  Gossen,  "  the  obstinacy 
of  a  single  proprietor  often  hinders  the  best  development  of  the 
land  which  belongs  to  him  and  prevents  its  utilisation  in  the  fashion 

1  No  notice  whatever  was  taken  of  it  then,  and  even  in  the  second  edition 
of  the  great  Handworterbuch  der  Staatsunssenschaften,  published  in  1900,  no  men- 
tion is  made  of  Gossen's  name,  although  the  third  edition  of  that  work  has  made 
ample  reparation.  The  book  was  reprinted  in  1889.  On  the  relation  between 
the  ideas  of  Gossen  and  those  of  Jevons  and  Walras  see  Walras's  interesting 
article,  Un  Economiste  inconnu,  Hermann  Henri  Gossen,  published  in  the  Journal 
dee  Economistes  in  1885  and  reproduced  in  his  Etudes  d'Sconomie  aociale,  pp.  351 
tt  seq. 


SYSTEMS  OF  LAND  NATIONALISATION          578 

that  would  best  meet  the  needs  of  production.  The  necessity  for  the 
compulsory  purchase  of  land  for  industrial  purposes,  for  the  making  of 
roads,  railways,  or  for  developing  mines,  affords  an  indication  of  the 
unsatisfactory  condition  of  landholding  as  it  exists  at  present."  1 

It  is  obviously  necessary  that  the  community's  right  to  the  soil 
should  again  be  restored  to  it,  so  that  everyone  might  be  free  to 
demand  and  to  obtain  the  use  of  as  much  of  it  as  he  required.  Every 
industry  could  then  choose  that  locality  which  seemed  best  fitted 
for  it.  The  right  of  using  the  land  might  be  disposed  of  by  public 
auction  and  given  to  the  bidder  who  offered  the  highest  rent.  There 
would  thus  be  a  kind  of  guarantee  that  the  organisation  of  produc- 
tion at  any  one  moment  was  being  carried  on  in  the  most  favourable 
fashion — relatively,  that  is  to  say,  to  the  knowledge  possessed  by 
the  community  at  that  period.2 

(6)  Walras's  position  is  not  quite  so  frankly  utilitarian  as  Gossen's. 
It  was  the  analysis  of  the  respective  rdles  of  the  individual  and  the 
State,  of  which  he  gave  an  exposition  in  his  lectures  on  La  Th&orie 
$nirale  de  la  SodiU  (1867),  that  inspired  his  reform.  Following  Henry 
George,  he  sought  a  reconciliation  of  individualism  and  socialism  3 
— a  reconciliation  which  he  variously  speaks  of  under  the  terms 
"  liberal  socialism, ""  synthetic  socialism, "  or  simply  "  syntheticism.  "4 

It  was  his  opinion  that  no  real  opposition  existed  between  the 
State  and  the  individual,  that  the  one  is  just  the  complement  of 
the  other.  Taken  separately,  it  has  been  well  said  that  they  are 
nothing  better  than  abstractions ;  the  only  real  man  is  the  social 
man — man  living  in  society.  This  man,  as  we  know,  has  two  kinds 
of  interests — the  one  personal  or  individual,  and  as  such  opposed 
to  the  interests  of  other  beings ;  the  other  social  or  collective, 

1  Entwickdung  der  Qesetze,  p.  250. 

*  Gossen  sees  other  advantages  that  would  follow  such  reform.  He  enume- 
rates them  thus :  (1)  The  confiscation  of  rent  would  reduce  the  possibility  of 
living  without  working,  and  this  would  increase  the  industrial  activity  of  the  class 
under  consideration.  (2)  The  legal  transference  of  property  would  be  greatly 
simplified.  (3)  Producers  would  be  exempted  from  buying  land  and  from  keeping 
capital  for  this  purpose.  (4)  Rent  would  take  the  place  of  taxation  to  a  very 
considerable  extent,  and  would  free  theoollection  of  it  from  every  trace  of  vexation 
or  injustice.  (Ibid.,  p.  273.) 

1  Cf.  the  fragment  entitled  Methode  de  Conciliation  ou  de  Synthese,  in 
the  Studes  d'Hconomie  sociale.  Henry  George  in  his  preface  to  Progress  and 
Poverty  writes  thus :  "  What  I  have  done  in  this  book  ...  is  to  unite  the 
truth  perceived  by  the  school  of  Smith  and  Ricardo  to  the  truth  perceived  by 
the  school  of  Proudhon  and  Lassalle  ;  to  show  that  laissez-faire  (in  ita  full,  true 
meaning)  opens  the  way  to  a  realisation  of  the  noble  dream  of  socialism." 

4  Etudes  d'flconomie  aociale,  p.  239. 


574  THE  THEORY  or  RENT 

common  both  to  himself  and  his  fellows — and  unless  these  are  secured 
the  existence  of  the  race  is  immediately  jeopardised.  The  two  groups 
of  interests  are  equally  important,  for  they  are  both  equally  necessary 
for  the  life  of  the  social  being.  The  State  and  the  individual  are 
mere  phases  in  the  life  of  the  same  being,  according  as  we  think 
of  him  pursuing  the  collective  interests  which  he  has  in  common  with 
his  fellow-men  or  his  more  personal  and  individual  interests.  Each 
has  its  own  sphere  of  activity  definitely  marked  off  from  the  other  by 
the  diverse  nature  of  the  respective  tasks  which  they  have  to  perform. 

The  duty  of  the  State  is  to  secure  those  general  conditions  of 
existence  which  are  necessary  for  everybody  alike.  Upon  the  indi- 
vidual devolves  the  duty  of  determining  his  own  personal  position 
in  society  through  perseverance  in  the  exercise  of  his  own  capacity 
in  any  line  of  activity  which  he  may  himself  choose.  But  if  both 
of  them,  individual  and  State  alike,  are  to  perform  their  respective 
tasks  efficiently,  they  must  be  supplied  with  all  necessary  resources. 
To  the  individual  should  accrue  the  wealth  which  results  from 
labour  and  saving,  to  the  State  the  revenue  which  results  from 
general  social  progress — i.e.  the  rent  of  land.  Provided  for  in  the 
manner  indicated,  there  would  be  no  necessity  for  taking  away  from 
the  individual  a  portion  of  the  fruit  of  his  labour  by  means  of  taxa- 
tion. Collective  ownership  of  land  and  rent,  private  ownership  of 
capital  and  labour,  together  with  their  incomes — such  is  the  social 
organisation  which  Walras  thought  would  solve  the  problem  of 
distribution  :  equal  conditions,  coupled  with  unequal  situations.1 

The  reforms  of  Gossen  and  Walras,  starting  from  a  different  angle 
as  they  do,  depend  for  their  realisation  upon  conditions  that  are 
exactly  identical.  Both  of  them  evince  the  most  scrupulous  respect 
for  the  prescriptive  rights  of  the  present  owners ;  and  both  agree 
that  the  State  has  no  more  right  to  appropriate  future  rents  a  upon 

1  See  the  charming  sixth  lesson  of  the  Th&orie  ginerale  de  la  Societe  in 
the  Stvdes  d'lSconomie  sociale. 

*  « In  order  to  justify  a  measure  involving  a  slight  diminution  in  the  rent  of 
landed  proprietors,  it  is  hardly  necessary  to  invoke  the  fact  that  rents  have  a 
faculty  of  growing  continuously  without  the  co-operation  of  the  proprietor.  We 
need  scarcely  point  out  that  this  increase  in  rent  over  a  certain  period  cannot 
enter  into  the  price  of  land  simply  because  it  cannot  be  calculated.  Conse- 
quently, when  a  buyer  buys  under  the  system  of  guarantee  afforded  by  the 
State  he  has  at  the  same  time  undoubtedly  bought  a  claim  to  all  the  variations 
of  rent  which  may  ensue.  .  .  .  Even  if  the  landed  proprietor  is  indemnified  by 
being  paid  a  perpetual  rent  equal  to  the  rent  of  his  land  at  the  time  of  confisca- 
tion, as  is  done  to-day  in  the  case  of  compulsory  purchase,  the  injustice  will 
not  be  as  great  as  it  otherwise  would  be,  but  it  will  not  be  removed  altogether.'* 
(Gossen,  Entwickelung  der  Gesetze,  pp.  257-258.) 


SYSTEMS  OF  LAND  NATIONALISATION          575 

which  these  owners  rely,  in  the  manner  suggested  by  John  Stuart 
Mill,  than  it  has  to  confiscate  present  rents,  as  Henry  George 
proposed.  The  only  way  in  which  reform  can  be  fairly  carried  out  is 
to  buy  back  the  land,  including  in  the  purchase  price  any  surplus 
values  upon  which  the  present  proprietors  have  set  their  hopes.  The 
most  expedient  way,  perhaps,  would  be  to  issue  bonds  and  to  offer 
these  to  the  proprietors  in  exchange  for  the  land.  The  rents,  which 
would  still  be  received  by  the  State — for  there  is  no  prospect  of 
cessation  of  growth — would  be  employed  partly  in  paying  interest 
on  the  debt  and  partly  in  redeeming  it  ;  so  that  at  the  end  of  a 
certain  period,  say  fifty  years,  the  State  would  have  paid  back  all 
the  capital  and  it  alone  would  henceforth  draw  the  rents.1 

It  would  have  been  unnecessary  to  add  anything  to  the  exposition 
as  given  by  Walras  but  for  the  objection  which  he  himself  raised 
to  it,  and  which  led  him  to  give  a  very  interesting  account  of  his 
belief  in  the  permanence  of  rent. 

"If,"  says  Walras,  "the  State  pays  to  the  proprietors  the 
exact  value  of  their  lands,  reckoning  in  that  price  a  sum  equal  to 
the  estimated  value  of  the  future  rent,  what  is  it  going  to  gain  by 
the  bargain  ?  "  If  the  value  of  the  soil  is  carefully  computed  in  the 
manner  indicated  above,  then  the  interest  on  the  capital  borrowed 
to  effect  the  purchase  and  the  rents  received  must  exactly  balance 
one  another,  for  one  is  just  the  price  of  the  other,  and  the  State  will 
find  that  the  rent  of  land  is  insufficient  to  repay  the  outlay 
involved.  The  results  will  cancel  one  another.  Some  inconveni- 
ences will  doubtless  be  avoided,  but  there  will  be  no  outstanding 
advantage.  How  are  we  to  get  rid  of  this  objection  ? 

The  difficulty  is  soon  removed,  for  once  the  system  outlined 
above  is  adopted  there  will  be  an  end  to  all  speculation  in  land. 
When  individual  buyers  find  that  they  must  pay  the  owners  a  price 
that  covers  all  surplus  values  which  the  land  may  possibly  yield  in 
the  future,  which  would  mean  that  they  would  not  get  any  of  that 
surplus  value  themselves,  they  will  not  be  quite  so  keen.  This  is 
not  the  case,  however,  at  the  present  time.  Speculation  of  this 
kind  is  rife  everywhere,  for  the  good  reason  that  a  surplus  value 
is  always  a  possible  contingency.  The  more  perspicacious  or  better 
informed  a  buyer  is,  the  more  firmly  does  he  believe  in  this  advance 
and  the  more  careful  is  he  to  safeguard  his  future  interests.  The 

1  Gossen  gives  reasons  for  thinking  that  the  State,  owing  to  its  superior 
position  as  compared  with  individuals,  might  offer  better  terms  to  the  proprietors 
than  ordinary  buyers  could — among  others,  that  the  State  can  borrow  cheaply  and 
could  consequently  offer  a  better  price. 


576  THE  THEORY  OF  RENT 

State,  so  soon  as  it  has  bought  back  the  land,  will  be  in  the  position 
of  the  speculator  in  question.  Walras  is  of  the  opinion  that  the 
surplus  value  is  certain  to  grow  in  future  even  more  rapidly  than 
the  actual  possessors  of  the  land  imagine.  Thanks  to  economic 
evolution,  what  the  private  proprietor  can  only  speculate  on  the 
State  can  rely  upon  with  absolute  certainty.1 

"  I  believe,  along  with  several  competent  economists,  that  when 
humanity  left  the  purely  agricultural  system  under  which  it  had 
lived  for  thousands  of  years  and  entered  upon  a  regime  of  industry 
and  commerce,  under  which  agriculture  is  still  necessary  to  feed  a 
growing  population,  but  only  possible  with  the  expenditure  of  a  vast 
amount  of  capital,  it  achieved  a  notable  triumph,  and  the  step  it 
then  took  marks  a  veritable  advance  in  economic  evolution.  I  also 
believe  that  as  the  result  of  this  evolution  rent  will  continue  to 
grow,  but  without  involving  any  scarcity  or  increase  in  the  value 
of  agricultural  produce — a  fact  that  has  escaped  everyone  except 
the  wideawake  and  the  well-informed,  and  by  which  proprietors 
alone  have  profited.  I  further  believe  that  if  the  State  had  bought 
the  land  before  this  evolution  had  taken  place  and  had  then  given 
of  its  resources  to  further  such  development,  even  the  normal 
growth  of  this  surplus  value  would  have  been  ample  to  clear  the 
debt."  2 

Walras  agrees  with  Ricardo,  and  a  kind  of  rehabilitation  of  the 
Ricardian  thesis  drives  him  to  the  conclusion  that  the  future  must 
witness  a  further  growth  of  this  surplus  value  of  land — merely 
because  of  the  limited  quantity  of  land  in  existence.  There  is  this 
difference,  however.  Whereas  Ricardo  bases  his  whole  contention 
upon  the  validity  of  the  law  of  diminishing  returns,  Walras  will 
not  even  entertain  the  thought  of  a  possible  diminution  in  the 
amount  of  agricultural  produce.  The  inevitable  progress  of  society 
which  leads  it  on  from  a  purely  agricultural  stage  right  up  to  the 
industrial-commercial  stage,  from  extensive  to  intensive  cultivation, 

1  A  similar  idea  underlies  Gide's  proposal  in  an  article  contributed  to  the 
Journal  des  Sconomiste*  for  July  1883.  "The  State  would  offer  to  buy  the 
land  and  pay  for  it  on  the  basis  of  ninety-nine  years'  purchase.  There  is  reason 
to  think  that  hardly  a  buyer  would  be  found  who  would  refuse  such  an  offer 
coupled  with  a  slight  compensation,  for  ninety-nine  years  ie  the  equivalent  of 
perpetuity  as  far  as  the  individual  is  concerned.  There  would  be  nothing  mean 
about  such  a  price  ;  really  it  would  be  more  of  a  gift  to  the  proprietor." 

*  Walras,  Studes  d'Sconomie  sociale,  p.  368.  A  mathematical  discussion  of 
the  theory  is  contained  in  the  Thiorie  mathematiqiie  du  Prix  des  Terres.  The 
same  argument  expressed  in  ordinary  language  may  be  found  in  the  article 
entitled  Un  fi  canonist  e.  inconnu  (Studes  d'Sconomie  sociale,  pp.  365  et  seq,),  and 
it  is  still  more  simply  summed  up  in  the  ProW&me  fiscal,  pp.  446-449. 


SYSTEMS  OF  LAND  NATIONALISATION          577 

must  result  in  increasing  the  value  of  land.  The  State  would  ease 
this  transitional  process  by  a  measure  of  appropriation,  and  could 
make  a  solid  contribution  to  the  success  of  this  gigantic  undertaking, 
which  is  to  apply  not  merely  to  land,  but  also  to  railways  and 
mines,  etc.1 

(c)  Numerous  and  various  are  the  reasons  invoked  by  the  advocates 
of  land  nationalisation.  Gossen's  ideal  is  the  maximum  product, 
while  Walras's  first  care  is  to  supply  the  State  with  all  necessary 
resources.  A  final  class  of  writers  regards  it  as  an  excellent  oppor- 
tunity of  giving  everybody  access  to  the  soil.  It  was  this  ideal 
of  free  land  that  inspired  the  late  Alfred  Russel  Wallace  to 
write  his  book  Land  Nationalisation :  its  Necessity  and  it*  Ainu, 
and  to  inaugurate  his  campaign  in  favour  of  nationalisation  in  1882. 

Wallace  imagined  that  the  mere  right  of  free  land  would  put  &D 
end  for  ever  to  the  worker's  dependence  upon  the  goodwill  of  the 
capitalist.  Nobody  would  be  found  willing  to  work  for  starvation 
wages  were  everyone  certain  that  on  a  free  piece  of  land  he  would 
always  obtain  his  daily  bread.  None  would  suffer  hunger  any 
longer,  for  the  soil,  at  any  rate,  would  always  be  there  awaiting 
cultivation.  Free  access  to  the  land  would  by  itself  solve  the 
problem  of  poverty  and  want,  and  this  would  be  by  no  means  one 
of  the  least  of  the  benefits  of  land  nationalisation.8 

The  essential  thing,  in  his  opinion,  is  to  give  to  every  worker  the 
right  to  possess  and  to  cultivate  a  portion  of  the  soil.3  His  proposal 
is  that  once  nationalisation  is  an  accomplished  fact  every  individual 
at  least  once  in  his  lifetime  should  be  given  the  opportunity  of 
choosing  a  plot  of  land  of  from  one  to  five  acres  in  extent  wherever 
he  like>  on  condition  that  he  personally  occupies  and  cultivates  it.4 

The  extremely  simple  character  of  the  proposal  makes  it  all 
the  more  notorious.  Unlike  the  other  schemes,  it  is  not  based 

1  "  The  same  considerations  would  apply  in  the  case  of  mines,  railways,  mono- 
polies of  every  kind,  natural  and  otherwise,  where  the  principle  of  free  com- 
petition is  in  operation  or  where  any  surplus  value  exists."  (Etudes  <T  Economic 
sociale,  p.  347,  note.  Cf.  also  pp.  237  et  seq.) 

1  Cf.  Escarra,  toe.  cit.,  p.  224.  See  also  Laveleye,  Le  Socialism*  contem- 
porain,  8th  ed.,  Appendix  I. 

»  Metin,  Le  Socialism*  en  Angleterre,  p.  179  (1897). 

•  "  The  possession  of  a  piece  of  land  frees  the  workman  from  dependence 
upon  the  masters,  which  is  one  cause  of  poverty.  The  worker  who  possesses 
land  is  free.  He  has  always  something  he  can  turn  his  hand  to  when  out  of 
work."  Elsewhere:  "  If  a  certain  quantity  of  land  is  given  to  the  workers  their 
wages  will  surely  rise,  for  no  one  will  work  for  another  unless  he  can  get  more 
than  he  gets  when  working  for  himself."  (Quoted  by  Esoarra,  p.  224,  note.) 
The  same  idea  occurd  in  Henry  George,  but  not  as  a  part  of  the  general  argument. 


578  THE  THEORY  OF  RENT 

upon  any  subtle,  complex  economic  analysis.  But  it  supplies  a  most 
convincing  platform  theme.  Closer  scrutiny,  however,  reveals  its 
almost  childish  nature. 

The  cultivation  even  of  the  smallest  piece  of  land  requires  some 
capital,  which  the  advocates  of  free  land  appear  to  forget  altogether. 
The  amount  of  capital  so  required  may  not  infrequently  be  in  excess 
of  the  modest  sum  possessed  by  the  working  man.  They  also  seem 
oblivious  of  the  fact  that  the  land  does  not  produce  all  the  year 
round  :  there  must  of  necessity  be  a  period  of  quiescence  when  the 
seeds  are  germinating.  And  if  we  are  to  suppose  that  the  worker  has 
sufficient  reserve  to  wait  for  the  harvest,  why  not  admit  at  once 
that  he  has  also  enough  to  tide  over  a  period  of  unemployment  ? 
A  few  pounds  in  the  bank  to  which  he  can  have  access  whenever 
he  likes  would  certainly  be  much  more  serviceable  in  mid-winter, 
say,  than  a  plot  of  land  situated  some  distance  away.  Cultivation 
also  requires  capacity  as  well  as  capital.  You  cannot  improvise  the 
peasant,  and  a  first-class  artisan  may  be  a  very  indifferent  cultivator. 
The  experience  of  distress  committees  seems  to  prove  this  point. 
The  advocates  of  free  land  have  a  mistaken  belief  in  the  efficacy 
of  the  proposed  remedy,  and  experience  would  quickly  show  them 
how  difficult  it  would  be  to  apply  it.1 

*  If  we  had  not  decided  against  the  inclusion  of  the  Italian  economists, 
this  would  have  been  the  place  to  devote  a  few  words  to  the  writings  of  Achilla 
Loria.  No  one  excels  him  as  a  writer  on  political  economy.  An  elaborate 
superstructure  of  great  economic,  political,  social,  and  even  religious  significance 
has  been  built  upon  the  foundation  of  free  land,  which  at  least  denotes  a  powerful 
imagination.  A  resume  of  this  thesis  is  contained  in  La  Terra  ed  il  Sistema 
eociale,  translated  for  the  Revue  £  Economic  politique  in  1892.  We  cannot 
examine  Loria's  system  here.  Suffice  it  to  say  that  in  his  Costituzione  economica 
odierna  (1900)  he  demands  that  the  law  should  recognise  each  man's  right  to 
the  land  :  either  to  a  unit  of  land  (i.e.  a  quantity  of  land  such  as  would  enable 
a  man  to  live  and  set  up  as  an  independent  producer)  or,  failing  that,  to  a  fraction 
of  such  a  unit. 

Such  is  the  theoretical  solution,  but  the  practical  suggestion  is  somewhat 
milder,  a  kind  of  territorial  wage  being  suggested.  Every  master  would  be 
obliged  to  give  to  bis  workmen,  in  addition  to  a  minimum  wage,  a  certain  amount 
of  land  at  the  end  of  a  given  number  of  years.  If  during  that  period  the  work- 
man has  been  employed  by  several  masters,  each  master  should  contribute  in 
proportion  to  the  length  of  time  he  has  been  in  his  service. 

At  the  end  of  a  certain  period  every  worker  would  thus  become  a  proprietor. 
These  would  thus  be  in  the  same  position  as  their  primitive  ancestors  were 
as  far  as  natural  economy  is  concerned,  and  would  be  able  to  join  with  the 
older  proprietors  in  a  kind  of  association  of  capital  and  labour  on  a  footing  of 
absolute  equality,  which  Signor  Loria  thought  would  be  a  most  fruitful  type  of 
organisation.  During  the  intervening  years  a  certain  amount  of  pressure  would 
have  to  be  put  upon  the  proprietors. 


SOCIALIST  EXTENSIONS  OF  RENT  579 

IV :  SOCIALIST  EXTENSIONS  OF  THE 
DOCTRINE  OF  RENT 

THE  writers  who  have  hitherto  engaged  our  attention  were  all  of 
them  individualists.  They  had  no  quarrel  with  the  institution  of 
private  property  as  such,  nor  were  they  hostile  to  the  existence  of 
capital  or  to  the  personal  advantage  which  may  accrue  from  the 
possession  of  exceptional  talent  or  ability.  The  orthodox  socialist, 
on  the  other  hand,  is  distinguished  by  an  aversion  to  both  interest 
and  rent,  and  some  of  them  even  go  the  length  of  denying  the 
individual's  claim  to  any  special  benefit  accruing  from  personal 
ability  if  it  has  the  effect  of  increasing  his  income  beyond  the  mere 
remuneration  of  labour. 

Between  the  two  conceptions  is  a  veritable  abyss,  and  the  ques- 
tion arises  as  to  whether  it  can  ever  be  bridged.  Some  writers 
confidently  reply  in  the  affirmative.  "  It  is  the  easiest  thing  in 
the  world.  Just  treat  your  interest  on  capital  and  the  revenue 
derived  from  exceptional  capacity  as  rent,  and  the  theory  of  rent 
will  supply  a  justification  not  only  for  the  appropriation  of  land, 
but  also  for  universal  collectivism."  It  was  in  England  that  this 
idea  was  first  mooted. 

England,  the  true  home  of  socialism,  the  England  of  Godwin 
and  Hall,  of  Thompson  and  Owen,  after  the  first  outburst  of  socialist 
activity  over  seventy  years  before,  had  not  given  birth  to  a  single 
socialist  scheme.  With  the  exception  of  John  Stuart  Mill,  who  was 
impressed  by  the  French  socialists,  English  writers  had  remained 
quite  indifferent  to  the  ideas  that  were  agitating  Europe.  Karl 
Marx  toiled  at  the  production  of  his  masterpiece,  Das  Kapital, 
in  the  very  heart  of  London  without  arousing  the  curiosity  of  a 
single  English  economist.  The  formation  of  socialist  parties  in 
Germany  and  France  after  1870  had  to  intervene  before  the  ideas 
of  the  great  collectivist  aroused  any  real  enthusiasm  in  Great 
Britain,  and  it  was  not  until  1880  that  a  small  Marxian  party  was 
formed  in  England.1  Just  about  the  same  time  another  group  of 
writers  known  as  the  Fabian  Socialists  began  to  preach  an  original 
and  characteristically  English  kind  of  socialism.1 

The  Fabian  Society  at  first  consisted  of  a  small  group  of  young 
men,  for  the  most  part  belonging  to  the  middle  classes,  and  holding 

1  The  Social  Democratic  Federation  was  founded  by  Hyndman  in  1881.  See 
M6tin,  Le  Socialisme  en  Angleterre,  chap.  6  (1897). 

1  Bernard  Shaw,  The  Fabian  Society,  what  it  hat  dont  and  how  it  hat  dont  it 
(1892 ;  Fabian  Tract,  No.  41). 


580  THE  THEORY  OF  RENT 

themselves  aloof  from  the  older  political  parties.  The  object  was 
"  the  prompt  reconstruction  of  society  in  accordance  with  the 
highest  moral  possibilities."  Success  appearing  somewhat  remote, 
and  being  anxious  for  more  immediate  results,  they  allowed  them- 
selves to  be  led  astray  by  ideas  borrowed  from  the  Marxian  and 
anarchist  doctrines  of  the  Continent.  But  they  very  soon  renounced 
the  revolutionary  spirit,  which  has  so  little  in  common  with  the 
English  temperament ;  and  in  order  to  emphasise  the  difference 
between  themselves  and  the  advocates  of  brute  force  and  the  believers 
in  a  sensational  historical  crisis  1  they  adopted  the  name  Fabian, 
which  is  derived  from  Fabius  Cunctator,  the  famous  adversary  of 
Hannibal.  The  school  has  always  been  very  critical  both  of  itself 
and  of  others,  somewhat  afraid  of  public  ridicule,  but  possessing 
none  of  the  enthusiasm  of  apostles.  Always  ready  to  banter  one 
another,2  to  destroy  their  ancient  idols,  and  to  dispense  with  every 
social  or  definitely  political  creed,  the  Fabians  rapidly  became  trans- 
formed into  a  society  of  students  and  propagandists  whose  interests 
are  exclusively  intellectual,  and  who  believe  that  "  in  the  natural 
philosophy  of  socialism  light  is  a  more  important  factor  than  heat."  * 
Such  an  attitude  is  hardly  conducive  to  success  in  a  socialist 
crusade,  but  the  Fabians  have  left  a  deep  impression — not  so  much 
upon  working  men,  perhaps,  as  upon  members  of  the  bourgeois  or 
middle  class.  Several  of  their  members  are  persons  of  great  literary 
distinction,  such  as  Mr.  Bernard  Shaw,  the  dramatist  and  critic,  Mr. 
and  Mrs.  Webb,  the  historians  of  Industrial  Democracy,  and  Mr. 
H.  G.  Wells,  the  novelist.  By  throwing  themselves  into  the  study 
of  social  conditions  of  different  kinds,  by  collaborating  in  the  publica- 
tion of  reviews  and  newspapers  without  distinction  of  party,  by 
publishing  pamphlets  and  calling  conferences,  they  have  managed  to 
stimulate  interest  in  their  ideas.  A  riswm&  of  these  ideas  is  given  in 
a  curious  collection  of  articles  entitled  the  Fabian  Essays,  published 
in  1889.  These  essays  represent  the  opinions  of  the  more  prominent 
Fabians  rather  than  of  the  Fabian  Society,  for  the  society  as  such  has 
only  a  practical  policy,  but  no  theoretical  doctrine  which  it  holds  in 
common.  It  calls  itself  socialist,4  and  would  welcome  the  trans- 

1  Report  on  Fabian  Policy  (Fabian  Tract,  No.  70). 

1  "  For  it  was  at  this  period  that  we  contracted  the  invaluable  habit  of 
freely  laughing  at  ourselves  which  has  always  distinguished  us,  and  which  has 
saved  us  from  becoming  hampered  by  the  gushing  enthusiasts  who  mistake 
their  own  emotions  for  public  movements."  (Bernard  Shaw,  loc.  cit.) 

8  Report  on  Fabian  Policy. 

4  Socialism,  as  understood  by  the  Fabian  Society,  means  the  organisation 
and  conduct  of  the  necessary  industries  of  the  country,  and  the  appropriation 


SOCIALIST  EXTENSIONS  OF  RENT  581 

formation  of  individual  into  collective  property.  On  the  other  hand, 
it  declares  that  it  has  "  no  distinctive  opinions  on  the  marriage  ques- 
tion, religion,  art,  abstract  economics,  historic  evolution,  currency, 
or  any  other  subject  than  its  own  special  business  of  practical 
democracy  and  socialism."  l  The  economic  theories  which  imme- 
diately interest  us  here  are  peculiar  to  certain  members  of  the  society. 
The  society  as  a  whole  was  doubtless  inspired  by  these  ideas,  but 
they  have  not  all  received  official  recognition  at  its  hands,  and  they 
are  not  even  accepted  by  some  adherents  of  the  school.2 

It  is  Sidney  Webb  more  especially  who  has  essayed  the  task  of 
finding  a  new  theoretical  basis  for  Fabian  collectivism.  Having 
rejected  the  Marxian  theory  of  labour-value,  and  conscious  of  the 
charm  possessed  by  the  modern  theories  of  Jevons,  of  Marshall, 
and  the  Austrians,  he  felt  the  need  of  some  new  justification  for  the 
collective  ownership  of  the  means  of  production.  Unable  to  free 
himself  from  the  fascination  which  Ricardo  has  always  exercised 
over  his  fellow-countrymen,  he  turns  to  the  theory  of  rent  of  that 
great  economist,  and  that  theory,  in  his  opinion,  is  '*  the  very  corner- 
stone of  collectivist  economy."  3 

It  is  perfectly  obvious  that  this  theory  of  rent  affords  ample 
justification  for  the  appropriation  of  the  revenue  of  land  by  proving 
that  this  revenue  is  purely  supplementary,  produced  as  it  is  only 
on  the  best  lands  and  not  on  the  worst,  where  the  worker  only 

of  all  forms  of  economic  rent  of  land  and  capital  by  the  nation  as  a  whole,  through 
the  most  suitable  public  authorities,  municipal,  provincial,  or  central.  The 
socialism  advocated  by  the  Fabian  Society  is  State  socialism  exclusively  (the 
term  is  used  to  distinguish  it  from  anarchist  socialism).  On  the  other  hand,  it 
"  steadfastly  discountenances  all  schemes  for  securing  to  any  person,  or  any 
group  of  persons,  the  entire  product  of  their  labour.  It  recognises  that  wealth 
is  social  in  its  origin  and  must  be  social  in  its  distribution,  since  the  evolution 
of  industry  has  made  it  impossible  to  distinguish  the  particular  contribution 
that  each  person  makes  to  the  common  product,  or  to  ascertain  its  value." 
(Report  on  Fabian  Policy.) 

1  Ibid. 

9  In  addition  to  the  Fabian  Essays,  the  principal  publications  containing  an 
exposition  of  Fabian  ideas  are  the  Fabian  Tracts,  a  collection  containing  a  great 
number  of  pamphlets  on  various  subjects ;  The  History  of  Trade  Unionism, 
by  Mr.  and  Mrs.  Webb  ;  Industrial  Democracy,  particularly  chaps.  1  and  2  of 
the  third  part,  by  the  same  authors  ;  and,  finally,  Problems  of  Modern  Industry 
(1898),  a  collection  of  lectures  and  articles,  also  by  Mr.  and  Mrs.  Webb. 

*  Mr.  and  Mrs.  Webb  in  their  History  of  Trade  Unionism  reject  "  that  con- 
fident sciolism  and  prejudice  which  has  led  generations  of  socialists  to  borrow 
from  Adam  Smith  and  the  '  classic '  economists  the  erroneous  theory  that 
labour  is  by  itself  the  creator  of  value  without  going  on  to  master  that  impreg- 
nable and  more  difficult  law  of  economic  rent  which  is  the  very  corner-stone  of 
collectivist  economy." 


582  THE  THEORY  OF  RENT 

produces  the  exact  equivalent  of  his  wages.  There  is  nothing  very 
new  in  this,  however. 

Equally  valid  is  its  justification  of  confiscated  interest.  Different 
kinds  of  capital,  different  machines,  implements,  and  buildings,  all 
of  which  are  employed  for  purposes  of  production,  show  the  same 
variety  of  quality,  and  consequently  produce  different  quantities 
of  material  goods,  just  as  different  lands  do.  The  employee  who 
works  with  "  marginal  capital,"  if  we  may  so  put  it,  or,  in  other 
words,  has  to  make  shift  with  the  minimum  of  tools  and  machinery, 
without  which  no  work  at  all  would  be  possible,  barely  produces 
the  equivalent  of  his  wages.  Everything  that  exceeds  this  minimum 
may  be  claimed  by  the  capitalist  as  payment  for  the  superior  yield 
of  the  capital  which  he  has  supplied.  Interest,  accordingly,  is  a 
differential  revenue — a  rent  which  ought  to  be  expressed  as  a  definite 
quantity  of  produce,  for  such  it  really  is,  and  not  as  so  much  per 
cent.1 

Finally,  any  who  possess  superior  ability  as  compared  with  those 
who  work  not  merely  with  a  minimum  of  capital  and  labour,  but 
with  a  minimum  of  intelligence  and  ability,  produce  a  surplus,  which 
they  generally  retain  for  themselves.  This  surplus  is  of  the  nature 
of  a  differential  rent — the  rent  of  ability.  Generally  it  is  the  result 
of  the  better  education  received  by  the  children  of  proprietors 
and  capitalists,  and  it  is  thus  the  indirect  outcome  of  private 
property.* 

This  ingenious  argument  is  not  very  convincing.  Even  though 
we  admit  that  interest  and  possibly  the  greater  portion  of  wages 
may  only  be  differential  revenues,  their  confiscation  would  require 
special  justification.  The  attributes  of  capital,  unlike  those  of  land 
as  defined  in  the  Ricardian  theory,  are  not  natural,  but  have  been 

1  "  The  interest  with  which  we  are  concerned  must  clearly  be  a  definable 
quantity  of  produce."  (The  National  Dividend  and  its  Distribution,  in  Problems 
of  Modern  Industry,  p.  227.  We  are  indebted  to  this  article  for  the  exposition 
which  we  have  given  of  the  Pabian  doctrine.) 

*  An  exposition  of  the  same  theory  is  given  in  Tract  No.  15,  English  Progreea 
towards  Social  Democracy :  "  The  individuals  or  classes  who  possess  social  power 
have  at  all  times,  consciously  or  unconsciously,  made  use  of  that  power  in  such 
a  way  as  to  leave  to  the  great  majority  of  their  fellows  practically  nothing 
beyond  the  means  of  subsistence  according  to  the  current  local  standard.  The 
additional  product,  determined  by  the  relative  differences  in  productive  efficiency 
of  the  different  sites,  soils,  capitals,  and  forms  of  skill  above  the  margin  of 
cultivation,  has  gone  to  those  exercising  control  over  these  valuable  but  scarce 
productive  factors.  This  struggle  to  secure  the  surplus  or  '  economic  rent '  is 
the  key  to  the  confused  history  of  European  progress,  and  an  underlying, 
unconscious  motive  of  all  revolutions."  Cf.  also  The  Difficulties  of  Individualism, 
in  Problems  of  Modern  Industry,  pp.  237-239. 


SOCIALIST  EXTENSIONS  OF  RENT  588 

conferred  upon  it  by  the  efforts  of  human  beings.  And  as  to  the 
rent  of  ability,  it  still  remains  to  be  seen  whether  society  would 
benefit  by  the  confiscation  of  this  rent.  As  a  scientific  explanation 
of  distribution  it  does  not  seem  to  us  a  particularly  attractive  one. 
The  distribution  of  incomes  is  effected  by  means  of  exchange  and 
depends  upon  prices,  but  Webb  makes  an  abstraction  of  prices  in 
order  to  concentrate  upon  the  material  product.  We  do  not  deny 
the  existence  of  rent  derived  from  fixed  capital,  such  rent  being 
approximately  measured  by  comparison  with  the  current  rate  of 
interest.  But  after  the  labours  of  Bohm-Bawerk  and  Fisher  it 
would  seem  impossible  to  explain  this  rate  itself  by  reference  to  the 
material  productivity  of  capital,  which  seems  to  be  the  essence  of 
Webb's  theory. 

The  latest  attempt  to  deduce  revolutionary  conclusions  from  the 
older  economics  and  to  found  a  theory  of  collectivism  upon  the 
Ricardian  doctrine  of  rent  has  proved  a  failure.  Even  Webb's  friends 
have  not  shown  the  enthusiasm  for  it  that  they  might  * — and  this 
despite  the  constant  allusion  to  the  "  three  monopolies  "  which  one 
meets  with  in  their  writings. 

The  interest  of  the  experiment  lies  not  so  much  in  itself  as  in 
the  indication  which  it  affords  of  the  more  recent  trend  of  thought 
in  this  matter.  We  have  already  drawn  attention  to  the  fact  that 
the  more  immediate  disciples  of  Marx  both  in  France  and  Germany 
have  refuted  his  theory  of  value,  showing  a  disposition  to  rally  to 
the  counter-theory  of  final  utility.  We  have  here  a  group  of  English 
socialists  undergoing  a  somewhat  similar  process  of  evolution.  On 
every  hand  it  seems  that  socialism  has  given  up  all  pretension  to 
creatiru  a  working  men's  political  economy  alongside  of  the  bourgeois, 
and  it  is  now  generally  recognised  that  there  can  only  be  one  political 
economy,  independent  altogether  of  all  parties  and  social  ideals, 
whose  sole  function  is  to  give  a  scientific  explanation  of  economic 
phenomena. 

The  Fabians  even  outdo  the  syndicalists  in  their  reaction  against 
the  Marxian  theories.  Not  only  is  the  theory  of  value  thrown 
overboard,  but  Marx's  whole  social  doctrine  is  rejected  as  well. 
There  are  two  points  on  which  the  opposition  is  particularly  marked, 
and  although  these  may  be  outside  the  scope  of  the  present  chapter 
it  is  necessary  to  mention  them  in  order  to  complete  our  exposition 
of  Fabian  ideas. 

1  Bernard  Shaw  in  his  Economic  Basis  of  Socialism,  published  in  the  Fabian 
Essays,  makes  a  very  neat  distinction  between  interest  properly  so  called  and 
economic  rent. 


584  THE  THEORY  OF  RENT 

Marx's  social  doctrine  was  built  upon  the  theory  of  class  war. 
Socialism  was  simply  the  creed  of  the  proletarian.  Its  triumph 
would  mean  the  victory  of  the  proletariat  over  the  bourgeoisie.  Its 
principles  are  the  direct  antithesis  of  those  which  govern  society  at 
the  present  time,  just  as  the  two  classes  are  directly  opposed  to  one 
another.  The  Fabians  entertain  no  such  views.  They  think  of 
socialism  as  a  mere  extension  of  the  ideals  of  bourgeois  democracy, 
and  they  would  be  quite  content  with  a  logical  development  and 
application  of  the  principles  which  at  present  govern  society.  "  The 
economic  side  of  the  democratic  ideal  is,  in  fact,  socialism  itself," 
writes  Sidney  Webb.1  Our  object  should  not  be  to  replace  the 
bourgeois  supremacy  by  the  proletarian  ascendancy,  nor  even  to 
emancipate  the  worker  from  the  tyranny  of  the  wage  system 
(for  under  the  socialist  regime,  as  the  Fabians  point  out,  every- 
body will  be  a  wage-earner),  but  merely  to  organise  industry  in 
the  interest  of  the  community  as  a  whole.  **  We  do  not  desire 
to  see  the  mines  and  the  profits  from  the  mines  transferred  to  the 
miners,  but  to  the  community  as  a  whole."  a  Socialism  is  not  a 
class  doctrine,  but  a  philosophy  of  general  interest.  "  Socialism  is 
a  plan  for  securing  equal  rights  and  opportunities  for  all."  8  Webb 
questions  the  existence  of  an  English  class  struggle  in  the  Marxian 
sense  of  the  word.4  On  the  contrary  :  "In  view  of  the  fact  that  the 
socialist  movement  has  been  hitherto  inspired,  instructed,  and  led 
by  members  of  the  middle  class  or  bourgeoisie,  the  Fabian  Society 
.  .  .  protests  against  the  absurdity  of  socialists  denouncing  the  very 
class  from  which  socialism  has  sprung  as  specially  hostile  to  it." 
One  cannot  see  much  similarity  between  this  point  of  view  and 
that  of  the  French  syndicalists.6 

The  Fabian  philosophy  of  history  is  equally  distinct.  For  Marx 
the  capital  fact  in  nineteenth- century  history  is  the  concentration  of 
property  in  the  hands  of  a  privileged  few,  and  the  consequent  pauper- 
isation of  the  masses.  The  necessary  consequence  of  this  twofold 
development  will  be  the  revolutionary  dispossession  of  the  former 
by  the  latter. 

Optimistic  as  they  are,  the  Fabians  are  not  prepared  to  deny 

1  Fabian  Essays,  p.  35. 

J  Socialism  True  and  False  (Tract  No.  51). 

»  What  Socialism  is  (Tract  No.  13). 

*  In  his  preface  to  Kurella's  German  book,  Sozialismus  in  England  (1898), 
he  mentions  the  fact  that  the  English  working  class  is  divided  into  a  number  of 
corporations  who  are  either  jealous  of  or  misunderstand  one  another,  but  hare 
not  what  we  may  properly  call  a  class  consciousness  (p.  10). 

•  Report  on  Fabian  Policy,  p.  7. 


SOCIALIST  EXTENSIONS  OF  RENT  585 

the  concentration  of  capital.  According  to  their  view,  the  prime 
fact  in  nineteenth-century  history  is  not  the  servility  of  the  masses, 
but  the  waning  authority  of  the  capitalists,  the  growing  import- 
ance of  collective  government  in  national  economy,  and  the  gradual 
dispossession  of  the  idlers  for  the  sake  of  the  workers,  a  process  that 
is  already  well  on  the  way  towards  consummation.  Webb  is  of  the 
opinion  that  socialism  is  being  realised  without  any  conflict,  and 
even  with  the  tacit  approval  of  its  victims.  "  Slice  after  slice  has 
gradually  been  cut  from  the  profits  of  capital,  and  therefore  from  its 
selling  value,  by  socially  beneficial  restrictions  on  its  user's  liberty 
to  do  as  he  liked  with  it.  Slice  after  slice  has  been  cut  off  the  incomes 
from  rent  and  interest  by  the  gradual  shifting  of  taxation  from 
consumers  to  persons  enjoying  incomes  above  the  average  of  the 
kingdom.  .  .  .  To-day  almost  every  conceivable  trade  is,  some- 
where or  other,  carried  on  by  parish,  municipality,  or  the  national 
Government  itself  without  the  intervention  of  any  middleman  or 
capitalist.  .  .  .  The  community  furnishes  and  maintains  its  own 
museums,  parks,  art  galleries,  libraries,  concert  halls,  roads,  streets, 
bridges,  markets,  slaughter-houses,  fire-engines,  lighthouses,  pilots, 
ferries,  surf-boats,  steam-tugs,  lifeboats,  cemeteries,  public  baths, 
washhouses,  pounds,  harbours,  piers,  wharves,  hospitals,  dispen- 
saries, gasworks,  waterworks,  tramways,  telegraph  cables,  allot- 
ments, cow  meadows,  artisans'  dwellings,  schools,  churches,  and 
reading-rooms."  And  even  where  private  industry  is  allowed  to 
survive  it  is  rigorously  supervised  and  inspected.  "  The  State 
in  most  of  the  larger  industrial  operations  prescribes  the  age  of  the 
worker,  the  hours  of  work,  the  amount  of  air,  light,  cubic  space, 
heat,  lavatory  accommodation,  holidays,  and  meal-times ;  where, 
when,  and  how  wages  shall  be  paid ;  how  machinery,  staircases, 
lift-holes,  mines,  and  quarries  are  to  be  fenced  and  guarded ;  how 
and  when  the  plant  shall  be  cleaned,  repaired,  and  worked.  .  .  . 
On  every  side  the  individual  capitalist  is  being  registered,  in- 
spected, controlled,  and  eventually  superseded  by  the  com- 
munity." * 

We  are  already  in  the  full  current  of  socialism,  declares  Mr.  Webb. 
Our  legislators  are  socialists  without  knowing  it.  "  The  economic 
history  of  the  century  is  an  almost  continuous  record  of  the  progress 
of  socialism."  *  The  Fabians,  adopting  a  saying  of  the  Saint- 
Simonians,  point  out  to  the  socialists  that  they  ought  to  be  content 
with  a  clear  exposition  of  the  evolution  of  which  everyone  knows 

1  Fabian  Essays,  pp.  47-49. 
•  Hid.,  p.  31. 


586  THE  THEORY  OF  RENT 

something,  although  perhaps  in  a  hazy  fashion.  "  Instead  of 
unconscious  factors  we  become  deliberate  agents  either  to  aid  or 
resist  the  developments  coming  to  our  notice."  x 

We  are  some  distance  away  from  Marx  here,  and  farther  still 
from  his  syndicalist  disciples.  We  have  really  been  led  back  to  the 
philosophy  of  history  as  it  was  interpreted  by  the  German  State 
Socialists.  Must  we,  then,  conclude  that  the  Fabians  are  State 
Socialists  who  feign  ignorance  of  the  fact  ? 

Fabian  socialism,  strictly  speaking,  is  not  a  new  scientific  doctrine. 
It  is  rather  a  plea  for  economic  centralisation,  an  idea  begotten  of 
the  modern  conditions  of  existence  in  Europe,  as  against  orthodox 
Liberalism,  which  is  somewhat  threadbare  but  still  holds  an  honour- 
able place  in  the  opinion  of  many  English  writers.  It  is  highly 
probable  that  the  legislative  activity  of  the  last  thirty  years,  which 
friends  and  foes  alike  regard  as  somewhat  socialistic,  will  appear 
to  our  descendants  as  a  moderate  movement  in  the  direction  of 
greater  centralisation. 

English  politics  even  long  before  this  had  begun  to  shake  off  its 
individualism  and  to  rid  itself  of  the  philosophic  and  political  doc- 
trines of  the  utilitarian  Radicals,  which  Bentham  and  his  friends  had 
formulated  early  in  the  nineteenth  century,  and  which  still  exercise 
a  considerable  influence  over  some  people.  The  Fabians  regard 
themselves  as  the  special  protagonists  of  the  new  standpoint.  They 
would  be  proud  to  consider  themselves  the  intellectual  successors 
of  the  utilitarian  Radicals,  who  simply  claim  to  express  the  new  desires 
of  a  great  industrial  democracy.  Labour  legislation  and  its  many 
ramifications,  municipal  socialism  spontaneously  developing  in  all 
the  bis  towns,  the  great  co-operative  "  wholesales  "  in  Glasgow  and 
Manchester,  furnish  persuasive  illustration  of  the  practical  socialism 
which  they  advocate.  "  It  is  not,"  writes  Mrs.  Sidney  Webb, 
"  the  socialism  of  foreign  manufacture  which  cries  for  a  Utopia 
of  anarchy  to  be  brought  about  by  a  murderous  revolution,  but  the 
distinctively  English  socialism,  the  socialism  which  discovers  itself 
in  works  and  not  in  words,  the  socialism  that  has  silently  embodied 
itself  in  the  Factory  Acts,  the  Truck  Acts,  Employers'  Liability  Acts, 
Public  Health  Acts,  Artisans'  Dwellings  Acts,  Education  Acts — in 

1  Sidney  Webb,  The  Difficulties  of  Individualism,  in  Problems  of  Modern 
Industry,  p.  231.  Also  in  the  Fabian  Essays,  p.  35,  he  declares  :  "  Socialist* 
as  well  as  individualists  realise  that  important  organic  changes  can  only  be 
(1)  democratic  .  .  .  ;  (2)  gradual  .  .  .  ;  (3)  not  regarded  as  immoral  by  the 
mass  of  the  people  ;  and  (4)  in  this  country,  at  any  rate,  constitutional  and 
peaceful." 


THE  SOLIDARISTS  587 

all  that  mass  of  beneficent  legislation  forcing  the  individual  into  the 
service  and  under  the  protection  of  the  State."  l 

The  Fabian  doctrine  is  the  latest  avatar  of  the  Ricardian  theory. 
It  would  really  seem  impossible  to  draw  any  further  conclusions 
from  it.  Everything  that  could  possibly  be  attempted  in  that 
direction  has  already  been  done,  although  other  weapons  of  war 
forged  against  the  institution  of  private  property  may  yet  come 
out  of  that  old  armoury.  But  that  is  hardly  probable,  especially  when 
we  remember  that  economic  science  no  longer  regards  rent  as  a  kind 
of  anomaly  amid  the  other  economic  phenomena.  There  is  no  doubt 
as  to  its  reality,  but  it  has  been  deprived  of  much  of  the  social 
importance  that  was  attributed  to  it  by  Ricardo  and  his  followers, 
and  it  has  consequently  lost  much  of  its  revolutionary  fecundity. 


CHAPTER  III :  THE  SOLIDARISTS 

I :  THE  CAUSES  OF  THE  DEVELOPMENT  OF  SOLIDARISM 

THE  word  "  solidarity,"  formerly  a  term  of  exclusively  legal  import,* 
has  during  the  last  twenty  years  been  employed  to  designate  a 
doctrine  which  has  aroused  the  greatest  enthusiasm — at  least  in 
France.  Every  official  speech  pays  homage  to  the  ideal,  every 
social  conference  ends  with  an  expression  of  approval.  Those  who 
wish  to  narrow  the  scope  of  industrial  warfare  as  well  as  those  who 
wish  to  extend  the  bounds  of  commercial  freedom  base  their  demands 
upon  "  a  sense  of  social  solidarity,"  and  it  is  becoming  quite  a 
common  experience  to  find  writers  on  ethics  and  education  who 
have  fallen  under  its  spell.  The  result  is  that  no  history  of  French 
economic  doctrines  can  pass  it  by.3 

1  B.  Potter  (Mrs.  Sidney  Webb),  The  Co-operative  Movement,  p.  16. 

*  Etymologically  "  solidarity  "  is  a  corruption  of  eolidum,  which  was  employed 
by  the  Roman  jurists  to  signify  the  obligation  incurred  by  debtors  who  were 
each  held  responsible  for  the  whole  amount  of  a  debt.     One  would  naturally 
expect  the  French  derivative  to  be  solidite,  which  was  the  term  used  by  the 
jurists  under  the  old  regime,  especially  by  Fothier.    Solidarity  was  substituted 
for  it  by  the  editors  of  the  Civil  Code. 

•  We  should  never  come  to  an  end  if  we  began  to  quote  passages  in  which 
the  merits  of  solidarity  are  set  forth.     We  must  content  ourselves  with  the 
following,  chosen  at  random  : 

M.  Millerand,  at  the  time  Minister  of  Commerce,  in  a  speech  delivered  at 
the  opening  of  the  Exposition  Univereelle  in  1900,  said  :  "Science  teaches  men 
the  true  secret  of  material  greatness  and  of  social  morality ;  and  all  its  teaching, 
in  a  word,  points  to  solidarity." 

M.  Doherme,  the  founder  of  the  People's  University  movement,  s»y»  :  "  Th» 


588  THE  SOLIDARISTS 

The  fundamental  idea  underlying  the  doctrine  of  solidarity, 
namely,  that  the  human  race,  taken  collectively,  forms  one  single 
body,  of  which  individuals  are  the  members,  is  not  by  any  means  new. 
St.  Paul  and  Marcus  Aurelius  among  the  writers  of  antiquity,  not 
to  mention  Menenius  Agrippa's  well-known  apologue,  gave  expression 
to  this  very  idea  in  terms  almost  identical  with  those  now  commonly 
used.1 

Nor  was  the  importance  of  heredity  wholly  lost  upon  the  ancients. 
The  hereditary  transmission  of  moral  qualities  was  a  doctrine 
taught  with  the  express  sanction  of  a  revealed  religion.  This  doctrine 
of  original  sin  is  perhaps  the  most  terrible  example  of  solidarism 
that  history  has  to  reveal.  Turning  to  profane  history,  we  are 
reminded  of  the  line  of  Horace  : 

Ddicta  majorum  immeritus  lues! 

We  must  also  remember  that  it  was  always  something  more  than 
a  mere  theory  or  dogma.  It  was  a  practical  rule  of  conduct,  and 
as  such  was  enjoined  by  law,  exhorted  by  religion,  and  enforced 
by  custom,  with  the  result  that  what  was  preached  was  also  prac- 
tised with  a  thoroughness  that  is  quite  unknown  at  the  present  day. 
We  have  an  illustration  of  this  in  the  collective  responsibility  of  all 
the  members  of  a  family  or  tribe  whenever  one  of  their  number  was 
found  guilty  of  some  criminal  offence.  A  survival  of  this  pristine 
custom  is  the  Corsican  vendetta  of  to-day. 

Finally,  there  is  that  other  aspect  of  solidarity  which  is  based 
upon  division  of  labour  and  the  consequent  necessity  of  relying  upon 
the  co-operation  of  others  for  the  satisfaction  of  our  wants.  The 
Greek  writers  had  caught  a  glimpse  of  this  interdependence  many 
centuries  before  the  brilliant  exposition  of  Adam  Smith  was  given 
to  the  world. 

All  the  manifold  aspects  of  the  doctrine,  whether  biological, 
sociological,  moral,  religious,  legal,  or  economic,  were  obviously 
matters  of  common  knowledge  to  the  writers  of  antiquity.  But  each 
phase  of  the  subject  seemed  isolated  from  the  rest,  and  it  was  not 

folly  of  solidarity  should  be  the  source  of  our  inspiration,  just  as  the  martyrs 
of  old  were  inspired  by  the  folly  of  the  Cross.  The  thing  that  wants  doing  is 
to  organise  democracy."  (La  Co-operation  des  Idees,  June  16,  1900.) 

1  "  For  as  we  have  many  members  in  one  body,  and  all  members  have  not 
the  same  office  ;  so  we,  being  many,  are  one  body  in  Christ,  and  every  one 
members  one  of  another."  (Romans  xii,  4  and  5.) 

"  As  in  physical  organisms  the  unity  is  made  up  of  separate  limbs,  so  among 
reasoning  things  the  reason  is  distributed  among  individuals  constituted  for  ticity 
of  co-operation."  (Marcus  Aurelius,  vii,  13;  Kendall's  translation.) 


DEVELOPMENT  OF  SOLIDARISM  589 

until  the  middle  of  the  nineteenth  century  that  it  dawned  upon 
thinkers  that  there  was  possibly  something  like  unity  underlying  this 
apparent  diversity.  It  has  already  been  impressed  upon  us  that 
Pierre  Leroux  and  a  few  of  the  disciples  of  Fourier,  as  well  as  Bastiat, 
had  realised  something  of  the  value  of  the  doctrine  of  solidarity  and 
of  the  appropriateness  of  the  term.  But  it  was  reserved  for  Auguste 
Comte  to  appreciate  its  full  possibilities.  **  The  new  philosophy, 
viewed  as  a  whole,  emphasises  the  intimacy  that  exists  between 
the  individual  and  the  group  in  their  different  relations,  so  that 
the  conception  of  social  solidarity  extending  throughout  time  and 
embracing  the  whole  of  humanity  has  become  a  fairly  familiar 
idea."  * 

It  is  necessary,  however,  to  inquire  somewhat  more  closely  into 
the  success  of  the  new  doctrine  in  holding  the  attention  both  of 
the  public  and  of  economists.  It  is  possible  that  the  seed  would 
have  borne  little  fruit  but  for  the  presence  of  extraneous  circum- 
stances which  helped  to  impress  the  public  with  a  sense  of  the 
importance  of  these  new  theories. 

Nothing  has  left  a  deeper  impression  upon  the  public  or  afforded 
a  better  illustration  of  the  infinite  possibilities  of  the  new  doctrine 
than  the  study  of  bacteriology.  The  prevalence  of  certain  contagious 
maladies  or  epidemics  had  been  too  terribly  prominent  in  the  history 
of  the  human  race  to  rfquire  any  confirmation ;  but  it  was  some- 
thing to  learn  that  the  most  serious  diseases  and  maladies  of  all 
kinds  were  communicated  from  man  to  man  by  means  of  invisible 
bacilli.  It  was  now  realised  that  men  who  were  supposed  to  be 
dying  a  natural  death  were  in  reality  being  slowly  murdered.  It 
was  with  something  like  horror  that  men  learned  that  the  consump- 
tive, vthe  hero  of  a  hundred  sentimental  tales,  every  day  expectorated 
sufficient  germs  to  depopulate  a  whole  town.  Such  "  pathological  " 
solidarity  is  being  more  closely  interwoven  every  day  by  the  ever- 
increasing  multiplicity  and  rapidity  of  the  means  of  communication. 
The  slow  caravan  journey  across  the  desert  was  much  more  likely 
to  destroy  the  vitality  of  the  bacilh'  picked  up  at  Mecca  than  the 
much  more  rapid  railway  journey  of  the  future,  which  will  speed 
the  pilgrim  across  the  sandy  wastes  in  a  few  hours.  The  traveller 
of  former  days,  who  went  either  afoot  or  on  horseback,  ran  less 
risk  of  infection  than  his  descendant  of  to-day,  who  perhaps  only 
spends  a  few  hours  in  the  metropolis. 

1  Discourt  aur  VEaprit  positif.  In  the  Court  de  Philosophic  he  frankly  pays 
it  this  well-deserved  compliment :  "  It  is  a  truly  capital  idea,  and  thoroughly 
modern  too." 


590  THE  SOLIDARISTS 

Sociology  has  also  brought  its  contingent  of  facts  and  theories.1 
The  sociologist  stakes  his  reputation  upon  being  able  to  prove  that 
the  fable  of  the  body  and  its  members  is  no  fable  at  all,  but  a  literal 
transcription  of  actual  facts,  and  that  the  union  existing  between 
various  members  of  the  social  body  is  as  intimate  as  that  which 
exists  between  the  different  parts  of  the  same  organism.  Such  is 
the  fullness  and  minuteness  with  which  the  analogy  has  been  pushed 
even  into  obscure  points  of  anatomical  detail  that  it  is  difficult  not 
to  smile  at  the  ndiveU  of  its  authors.  It  is  pointed  out  that  so  close 
is  the  resemblance  between  the  respective  functions  in  the  two 
cases  that  the  term  "  circulation  "  does  duty  in  both  spheres,  and  a 
comparison  is  instituted  between  nutrition  and  production,  reproduc- 
tion and  colonisation,  and  accumulation  of  fat  and  capitalism.  In 
Florence  during  the  Middle  Ages  the  bourgeois  were  spoken  of  as 
the  fat  people,  the  workers  as  the  small  people.  The  organs  also 
are  very  similar.  Arteries  and  veins  have  their  counterpart  in 
the  railway  system,  with  its  network  of  "  up "  and  "  down " 
lines.  The  nervous  system  of  the  one  becomes  the  telegraphic 
system  of  the  other,  with  its  rapid  communication  of  news  and 
sensations.  The  brain  becomes  the  seat  of  government,  the 
heart  is  the  bank ;  and  between  the  two,  both  in  nature  and  in 
society,  there  is  a  most  intimate  connection.  Even  the  white 
corpuscles  have  a  prototype  in  the  police  fof  ce,  whose  duty  is  to  rush 
to  the  seat  of  disorder  and  to  attempt  to  crush  it  immediately. 

The  sociological  analogy,  ingenious  rather  than  scientific,  did 
not  have  a  very  long  vogue.2  But  it  has  at  least  supplied  a  few 
conclusions  which  are  thoroughly  well  established,  and  which  serve 
as  the  basis  of  the  solidarist  doctrine.  Among  these  we  may 
mention  the  following : 

(a)  That  solidarity  in  the  sense  of  the  mutual  dependence  of 
members  of  the  same  body  is  a  characteristic  of  all  life.  Inorganic 
bodies  are  incomplete  simply  because  they  are  mere  aggregates. 
Death  is  nothing  but  the  dissolution  of  the  mysterious  links  which 

1  Social  biology  dates  from  the  publication  of  Professor  Schaffle's  great 
work  Bail  und  Leben  des  sozialen  Kdrpers  (1875-78) ;  possibly  from  the  publication 
of  Rodbertus's  work — at  any  rate,  Rodbertus  accuses  Schaffle  of  plagiarism.  See 
also  Spencer's  Principles  of  Sociology.  Aristotle  had  already  ventured  to  say 
that  "  an  animal  is  just  like  a  well-ordered  city,"  a  proposition  that  might  well 
be  inverted. 

*  There  are  still  a  few  adherents  left.  See  M.  Worms 'B  book,  Organisms  et 
SocitU,  and  Lilienfeld's  Pathologie  sociale. 

Herbert  Spencer,  who  was  the  pioneer  of  the  analogy,  had  abandoned  it ; 
and  Auguste  Comte,  the  godfather  of  sociology,  took  good  care  to  put  sociologists 
on  their  guard  against  the  method,  which  he  considered  irrational. 


DEVELOPMENT  OF  SOLIDARISM  591 

bind  together  the  various  parts  of  the  living  organism,  with  the 
result  that  it  relapses  into  the  state  of  a  corpse,  in  which  the  various 
elements  become  indifferent  to  the  presence  of  one  another  and  are 
dissipated  through  space,  to  enter  into  new  combinations  at  the 
further  call  of  nature. 

(&)  That  solidarity  becomes  more  perfect  and  intimate  with  every 
rise  in  the  biological  scale.  Completely  homogeneous  organisms 
scarcely  differ  from  simple  aggregates.  They  may  be  cut  into 
sections  or  have  a  member  removed  without  suffering  much  damage. 
The  section  cut  off  will  become  the  centre  of  independent  existence 
and  the  amputated  limb  will  grow  again.  In  the  case  of  some 
organisms  of  this  kind  reproduction  takes  the  form  of  voluntary  or 
spontaneous  segmentation.  But  in  the  case  of  the  higher  animals  the 
removal  of  a  single  organ  sometimes  involves  the  death  of  the  whole 
organism,  and  almost  always  imperils  the  existence  of  some  others. 

(c)  That  a  growing  differentiation  of  the  parts  makes  for  the 
greater  solidarity  of  the  whole.  Where  every  organ  is  exactly  alike 
each  is  generally  complete  in  itself.  But  where  they  are  different 
each  is  just  the  complement  of  the  other,  and  none  can  move  or 
exist  independently  of  the  rest. 

One  has  only  to  think  of  the  treatment  meted  out  to  the 
innovator  by  primitive  tribes  to  realise  the  tremendous  solidarity 
of  savage  society.  The  "  boycotting  "  familiar  in  civilised  countries 
provides  a  similar  example. 

Political  economy,  in  addition  to  an  unrivalled  exposition  of 
division  of  labour  (which,  as  we  have  seen,  was  not  unknown  in 
classical  times),  has  adduced  several  other  incidental  proofs  of 
solidarity,  such  as  bank  failures  in  London  or  Paris  and  short  tune 
in  the  diamond  or  automobile  industry  as  the  result  of  a  crisis  in 
New  York  or  an  indifferent  rice  harvest  in  India.  To  take  a 
simpler  case,  consider  how  easy  it  would  be  for  the  secretary  of  an 
electrical  engineers'  union  to  plunge  whole  cities  into  darkness. 
The  general  strike,  the  latest  bugbear  of  the  bourgeoisie,  owes  its 
very  existence  to  the  growing  sense  of  solidarity  among  working  men. 
A  sufficient  number  of  workmen  have  only  to  make  up  their  minds  to 
remain  idle  and  society  has  either  to  give  way  to  their  demands  or 
perish. 

Add  to  this  the  remarkable  development  which  has  taken  place 
in  the  spreading  of  news  and  the  perfecting  of  telegraphic  com- 
munication, by  which  daily  and  even  hourly  men  of  all  nations  are 
swayed  with  feelings  of  sorrow  or  joy  at  the  mere  recital  of  some 
startling  incident  which  formerly  would  have  influenced  but  a  very 


592  THE  SOLIDARISTS 

small  number  of  people.1  Such  agencies  are  not  unworthy  of  com- 
parison with  those  subtle  human  sympathies  which  are  known  by 
the  name  of  spiritualism  or  telepathy.  Thus  from  every  side,  from 
the  limbo  of  occultism  as  well  as  from  the  full  daylight  of  everyday  life, 
the  presence  of  numberless  facts  goes  to  show  that  each  for  all  and 
all  for  each  is  not  a  mere  maxim  or  counsel  of  perfection,  but  a 
stern,  practical  fact.  The  good  or  bad  fortune  of  others  involves  our 
own  well-being  or  misfortune.  The  ego,  as  someone  has  said,  is  a 
social  product.  These  are  some  of  the  founts  from  which  the  stream 
of  solidarism  take  its  rise. 

But  that  is  not  all.  The  doctrine  of  solidarity  had  the  good 
fortune  to  appear  just  when  people  were  becoming  suspicious  of 
individualist  Liberalism,  though  unwilling  to  commit  themselves 
either  to  collectivism  or  State  Socialism. 

In  France  especially  a  new  political  party  in  process  of  formation 
was  on  the  look-out  for  a  cry.  The  new  creed  which  it  desired  must 
needs  be  of  the  nature  of  a  via  media  between  economic  Liberalism  on 
the  one  hand  and  socialism  on  the  other.  It  must  repudiate  laissez- 
faire  equally  with  the  socialisation  of  individual  property ;  it  must 
hold  fast  to  the  doctrine  of  the  rights  of  man  and  the  claims  of  the 
individual  while  recognising  the  wisdom  of  imposing  restrictions 
upon  the  exercise  of  those  rights  in  the  interests  of  the  whole  com- 
munity. This  was  the  party  which  called  itself  Radical  then,  but 
now  prefers  to  be  known  as  the  Radical-Socialist  party.  German 
State  Socialism  as  expounded  about  the  same  time  was  closely  akin 
to  it.  But  the  German  conception  of  the  State  as  something  entirely 
above  party  was  an  idea  that  was  not  so  easily  grasped  in  France  as 
in  Prussia.  History  in  the  two  countries  had  not  emphasised  the 
same  truths.  Solidarism,  so  to  speak,  is  State  Socialism  in  a  French 
garb,  but  possessed  of  somewhat  better  grace  in  that  it  does  not 
necessarily  imply  the  coercive  intervention  of  the  State,  but  shows 
considerable  respect  for  individual  liberties.2 

1  "  The  enormous  development  of  steam  communication  and  the  spread  of 
the  telegraph  over  the  whole  globe  have  caused  modern  industry  to  develop 
from  a  gigantic  starfish,  any  of  whose  members  might  be  destroyed  without 
affecting  the  rest,  into  a  /*eya  &ov  which  is  convulsed  in  agony  by  a  slight 
injury  in  one  part."  (Nicholson,  Effects  of  Machinery  on  Wages,  p.  117.) 

*  It  was  in  1889,  if  we  mistake  not,  that  the  term  "  solidarity  "  was  proposed 
as  the  title  of  a  new  economic  school  in  a  lecture  entitled  UScole  nouvelle.  This 
lecture  was  published,  along  with  others,  in  a  small  volume  entitled  Quatre  Ecolea 
d'Sconomie  sociole  (1890,  Geneva)  (UScole  liberate,  by  Frederic  Passy  ;  L'Ecoh 
catholiquc,  by  Claudio  Jannet ;  L'lScole  socialiste,  by  M.  Stiegler ;  and  L'Scoh 
nouvelle,  by  M.  Gide).  The  characteristics  of  the  various  schools  are  summed 
up  as  follows :  The  one  is  the  school  of  liberty,  the  other  of  authority, 


THE  SOLIDARIST  THESIS  598 

The  new  word  performed  one  final  service  by  usurping  the 
functions  of  the  term  "charity,"  which  no  one  was  anxious  to  retain 
because  of  its  religious  connection.  The  other  term,  "fraternity," 
which  had  done  duty  since  the  Revolution  of  1848,  was  somewhat 
antiquated  by  this  time,  and  charged  with  a  false  kind  of  sentimen- 
talism.  The  word  "solidarity,"  on  the  contrary,  has  an  imposing, 
scientific  appearance  without  a  trace  of  ideology.  Henceforth  every 
sacrifice  which  is  demanded  in  the  interests  of  others,  whether  grants 
to  friendly  societies  or  workmen's  associations,  cheap  dwellings, 
workmen's  pensions,  or  even  parish  allowances,  is  claimed,  not  in  the 
interests  of  charity,  but  of  solidarity.  And  whenever  such  demand 
is  made  the  approved  formula  is  always  used — it  is  not  a  work  of 
charity,  but  of  solidarity,  for  charity  degradeth  whereas  solidarity 
lifteth  up. 


II :  THE  SOLIDARIST  THESIS 

THE  current  is  seldom  very  clear  when  the  tributaries  are  numerous, 
and  the  stream  must  deposit  its  sediment  before  it  becomes  limpid. 
So  here  much  greater  precision  was  needed  if  the  doctrine  was  ever 
to  become  general  in  its  scope  or  even  popular  in  its  appeal. 

M.  Leon  Bourgeois,  one  of  the  leaders  of  the  Radical-Socialist 
party,  to  his  eternal  credit  attempted  some  such  clarification  by 
employing  the  term  "  solidarity,"  hitherto  so  vaguely  metaphysical, 
in  a  strictly  legal  fashion  to  designate  a  kind  of  quasi-contract. 
Quite  a  sensation  was  caused  by  M.  Bourgeois's  work — a  result  due 
alike  to  the  prominent  position  of  the  author  and  the  opportune 
moment  at  which  the  book  appeared.  The  greatest  enthusiasm 
was  shown  for  the  new  doctrine,  especially  in  the  universities  and 
among  the  teachers  in  100,000  elementary  schools.  An  equally 
warm  welcome  was  extended  to  it  in  democratic  circles,  where  the 
desire  for  some  kind  of  lay  morality  had  by  this  time  become  very 

while  the  third  is  the  school  of  equality.  Gide  then  proceeds  :  "  Were  I  asked 
to  define  what  I  understand  by  the  New  School  in  a  single  word,  I  should  call 
it  the  Solidarity  School.  Unlike  liberty,  equality,  and  fraternity,  solidarity 
is  not  a  very  high-sounding  word,  nor  is  it  a  mere  ideal.  It  is  just  a  fact,  one 
of  the  best-established  facts  of  history  and  experience,  and  the  most  important 
discovery  of  our  time,  and  this  fact  of  solidarity  is  becoming  better  established 
every  day." 

It  would  have  been  better,  perhaps,  to  have  spoken  of  a  new  movement 
rather  than  of  a  new  school,  seeing  the  variety  of  schools,  some  of  them  actually 
opposed  to  one  another,  such  as  the  school  of  Biological  Naturalism  and  the 
Christian  school,  the  Anarchist  school  and  the  State  Socialist  school,  that  have 
adopted  solidarity  as  a  part  of  their  creed. 


594  THE  SOLIDARISTS 

strong.  It  becomes  necessary,  accordingly,  to  give  a  more  detailed 
analysis  of  the  theory  than  was  possible  within  the  compass  of  the 
small  volume  in  which  it  was  first  expounded.1 

In  the  first  place  it  must  be  noted  that  the  doctrine  connotes 
something  more  than  the  mere  application  or  extension  of  the  idea 
of  natural  solidarity  to  the  social  or  moral  order.  On  the  contrary, 
it  is  an  attempt  to  remove  some  of  the  anomalies  of  natural  solidarity. 
A  firm  belief  in  the  injustice  of  natural  solidarity,  or  at  least  a 
conviction  that  things  are  so  adjusted  that  some  individuals  obtain 
advantages  which  they  by  no  means  deserve  while  others  are 
burdened  with  disadvantages  which  are  none  of  their  seeking,  lies 
at  the  root  of  the  doctrine.  There  is  a  demand  for  intervention  in 
order  that  those  who  have  benefited  by  the  accidents  of  natural 
solidarity  should  divide  the  spoils  with  those  who  have  been  less 
fortunate  in  drawing  prizes  in  the  lottery  of  life.  It  is  for  Justice  to 
restore  the  balance  and  correct  the  abnormalities  which  a  fickle  sister 
has  created.  Just  as  it  has  been  seen  that  man  may  utilise  the  forces 
of  nature,  against  which  he  formerly  was  wont  to  struggle,  to  further 
his  own  ends,  so  solidarity  puts  forth  a  claim  for  the  co-operation  of 
Justice  to  correct  the  anomalies  begotten  of  brute  strength,  believing 
that  only  in  this  way  is  real  advance  possible  or  any  kind  of  improve- 
ment even  remotely  attainable. 

Natural  solidarity  2  tells  us  that  as  a  result  of  the  division  of  labour, 

1  M.  Leon  Bourgeois's  La  Solidarity  appeared  originally  as  a  series  of  articles 
(iontributed  to  the  Nouvette  Revue  in  1896.  These  were  published  in  book  form 
in  the  following  year.  The  different  aspects  of  the  question  have  been  dealt 
with  in  a  series  of  lectures  delivered  by  various  authors  at  the  ficole  des  Hautes 
fitudes  sociales  under  the  presidency  of  M.  Bourgeois  himself,  and  published  in 
a  volume  entitled  Essaid'une  Philosophic  de  la  Solidariti  (1902).  An  association 
for  the  propagation  of  the  new  ideas  was  founded  in  1895  under  the  name  of  La 
Socie'te'  d'fiducation  sociale.  An  International  Congress  was  called  together  on  the 
occasion  of  the  1900  Exposition,  but  since  then  the  signs  of  activity  have  been  few. 

French  books  and  articles  dealing  with  the  subject  are  plentiful  enough. 
We  can  only  mention  La  Solidariti  sociale  et  set  Nouvdles  Formules,  by  M. 
d'Eichthal  (1903) ;  the  annual  report  of  L'Acade'mie  des  Sciences  morales  et 
politiques  for  1903 ;  M.  Bougie's  book.  Le  Solidarisme  (1907) ;  and  Fleurant'a 
La  Solidariti  (1907).  There  is  hardly  a  manual  for  teachers  published  which 
does  not  contain  a  chapter  devoted  to  this  question. 

*  "  The  fact  that  such  a  thing  as  natural  solidarity  exists  should  not  be 
taken  to  imply  that  it  must  necessarily  be  just.  Justice  can  never  be  realised 
unless  the  laws  of  solidarity  are  first  observed ;  but  once  these  have  been 
established,  their  effects  must  be  modified  to  make  them  conform  to  the  require- 
ments of  justice.  The  actual  and  the  ideal  should  never  be  confused  ;  they  are 
the  direct  contraries  of  one  another.  But  it  is  absolutely  necessary  that  the 
first  should  be  established  before  we  can  realise  the  moral  necessity  for  the 
other."  (Bourgeois,  Philosophic  de  la  Solidariti,  pp.  13,  17.) 


THE  SOLIDARIST  THESIS  595 

of  the  influence  of  heredity,  and  of  a  thousand  other  causes  which  have 
just  been  described,  every  man  owes  either  to  his  forbears  or  his  con- 
temporaries the  best  part  of  what  he  has,  and  even  of  what  he  himself 
is.  As  Auguste  Comte  has  put  it,  "  We  are  born  burdened  with  all 
manner  of  social  obligations."  Nor  is  it  an  uncommon  thing  to 
meet  with  the  word  "  debt "  or  "  obligation  "  in  the  articles  of  the 
French  Constitution.  In  the  Constitution  of  1793,  for  example,  the 
duty  of  public  assistance  is  spoken  of  as  a  sacred  debt.  But  the 
term  was  loosely  employed  in  the  sense  of  noblesse  oblige  or  richesse 
oblige,  every  individual  being  left  free  to  carry  out  the  obligation  as 
best  he  could  in  accordance  with  the  dictates  of  his  own  conscience. 
It  is  necessary,  however,  to  transform  the  duty  into  a  real  debt,  to 
give  it  a  legal  status,  and  when  not  voluntarily  performed  a  legal 
sanction  as  well.  If  we  are  anxious  to  know  exactly  how  this  is  to 
be  done  we  have  only  to  turn  to  Articles  1371-81  of  the  Civil  Code, 
where  in  the  chapter  dealing  with  quasi-contracts  we  shall  come 
across  a  section  headed  "  Of  Non-conventional  Contracts." 

The  title  would  seem  to  imply  the  validity  of  debts  not  explicitly 
contracted — that  is  to  say,  the  existence  of  obligations  which  have 
not  involved  any  volitional  undertaking  on  the  part  of  either  party 
concerned.  The  first  case,  that  of  injury  inflicted  upon  others, 
whether  wilfully  or  not,  is  referred  to  as  quasi-misdemeanour,  and 
other  instances  mentioned  in  the  section  are  spoken  of  as  quasi- 
contracts.  Illustrations,  which  are  plentiful  enough,  include  pay- 
ments made  when  not  really  due,  attention  to  the  business  of 
another  without  any  definite  mandate  authorising  such  inter- 
ference, the  obligation  of  the  inheritor  of  property  to  pay  off  debts 
incurred  by  the  previous  owner,  the  recognition  of  the  common 
interest  which  people  living  in  the  same  neighbourhood  possess, 
and  which  also  exists  between  those  who  own  property  and 
those  who  lease  it,  between  those  who  use  it  and  those  who 
inherit  it. 

Wherever  anything  of  the  nature  of  a  quasi- contract  exists  we 
may  be  tolerably  certain  that  it  is  the  product  of  de  facto  or  natural 
solidarity.  Such  solidarity  may  take  its  rise  in  the  mere  fact  of 
propinquity  or  the  mere  feeling  of  neighbourliness  ;  but  more  often 
than  not  it  involves  a  measure  of  control  over  the  lives  of  others, 
which  is  one  of  the  outstanding  features  of  a  regime  of  division  of 
labour.  Then  follow  the  familiar  phenomena  of  fortunes  amassed 
to  the  detriment  of  others  through  the  acquisition  of  unearned 
increment  and  the  operation  of  the  laws  of  inheritance — the  source 
of  so  many  inequalities.  Nor  must  we  forget  the  prejudicial  effect 


596  THE  SOLIDARISTS 

of  quasi-misdemeanour  upon  the  fortunes  of  others.  The  result  is 
that  the  whole  of  society  seems  built,  if  not  upon  an  original  explicit 
contract,  as  Rousseau  imagined,  at  least  upon  a  quasi-contract ;  and 
seeing  that  this  quasi-contract  receives  the  tacit  submission  of  the 
parties  concerned,  there  is  no  reason  why  it  should  not  be  legally 
binding  as  well. 

Now  the  existence  of  a  debt  implies  that  someone  must  pay  it, 
and  the  next  question  is  to  determine  who  that  someone  ought  to  be. 

Obviously  it  can  only  be  those  who  have  benefited  by  the  exist- 
ence of  natural  solidarity — all  those  who  have  amassed  a  fortune,  but 
whose  fortune  would  be  still  to  make  but  for  the  co-operation  of  a 
thousand  collaborators,  both  past  and  present.  Such  individuals 
have  already  drawn  more  than  their  share  and  have  a  balance  to 
make  up  on  the  debit  account.  This  debt  should  certainly  be  paid. 
It  is  all  the  better  if  it  is  done  voluntarily,  as  an  act  of  liberality 
arising  out  of  goodness  of  heart — guia  bonus,  as  the  Gospel  narrative 
puts  it,  of  the  rich  good  man.  But  this  is  hardly  probable.  Most 
people  will  pay  just  when  they  are  obliged  to  ;  but  such  people  have 
no  right  to  consider  themselves  free,  and  no  claim  to  the  free  disposal 
of  their  goods  until  they  have  acquitted  themselves  honourably.1 
Individual  property  will  be  respected  and  free  when  every  social 
debt  which  it  involves  has  been  adequately  discharged,  and  not 
before  then.2  Until  this  is  done  it  is  useless  to  speak  of  the  existence 
of  competition. 

The  next  question  is  to  determine  who  is  to  receive  payment. 
Payment  ought  to  be  made  to  those  who,  instead  of  bene- 
fiting by  the  existence  of  natural  solidarity,  have  suffered  loss 
through  its  operation — the  disinherited,  as  they  are  rightly  called.8 
All  those  who  have  not  received  a  fair  share  of  the  total  wealth 
produced  by  the  co-operation  of  all  naturally  find  themselves  in 

1  "  There  are  some  debts  which  are  hardly  noticed  at  all,  but  which  ought  to 
be  paid  all  the  same."  (Bourgeois,  Philosophic  de  la  Solidarite,  p.  60.)  "  There  is  a 
real  claim  where  we  thought  there  was  only  a  moral  obligation,  and  a  debt  where 
we  thought  there  was  only  a  sacrifice."  As  the  Gospel  says  :  "  Unto  whomso- 
ever much  is  given,  of  him  shall  be  much  required."  (Luke  xii,  48.)  "So 
that  ye  come  behind  in  no  gift."  (1  Corinthians  i,  7.) 

1  "  No  man  is  free  as  long  as  he  is  in  debt.  He  becomes  free  the  moment 
he  pays  off  that  debt.  The  doctrine  of  solidarity  is  just  the  corrective  of  the 
theories  of  private  property  and  individual  liberty."  (Bourgeois,  op.  cit.,  p.  45.) 

'  M.  Bourgeois  also  points  out  that  just  as  our  ancestors  were  indebted  to 
us,  so  are  we  indebted  to  those  that  shall  come  after  us.  But  that  is  a  different 
thing,  and  the  theory  does  not  seem  very  sound  on  this  point.  It  is  strange 
to  think  that  creditors  long  since  dead  should  transfer  the  debt  which  was  owing 
to  them  to  the  credit  of  generations  yet  unborn! 


THE  SOLIDARIST  THESIS  597 

the  position  of  creditors.  It  is  not  easy  to  name  them,  perhaps,  but 
the  State  can  reach  them  a  helping  hand  in  a  thousand  different 
ways.  State  action  of  this  kind  was  formerly  spoken  of  as  public 
assistance  ;  nowadays  it  is  termed  solidarity  or  mutual  insurance. 

The  payment  may  take  the  form  either  of  a  voluntary  contribu- 
tion to  help  some  solidarist  effort  or  other,  or  an  obligatory  contribu- 
tion levied  by  the  State.  Some  advocate  progressive  taxation,  for 
if  it  be  true  that  profits  tend  to  grow  progressively  in  proportion  as 
an  increase  in  the  variety  and  strength  of  the  means  of  production 
takes  place,  why  not  a  progressive  tax  as  well  ?  l  Besides,  the  tax 
would  be  of  a  semi-sacred  character,  because  it  would  mean  the 
discharging  of  an  important  social  debt.  Nor  is  there  anything 
very  extravagant  in  the  demand  that  the  State  should  see  that 
everyone  makes  a  contribution  in  proportion  to  his  ability,  seeing  that 
the  natural  function  of  the  State  is  to  be  the  guardian  of  contracts.2 

It  is  still  more  difficult  to  assess  the  rate  of  payment.  The 
conditions  under  which  payment  would  be  made,  says  M.  Bourgeois, 
would  be  such  as  the  associates  themselves  would  have  adopted 
had  they  been  free  to  discuss  the  terms  of  their  engagement.  In 
other  words,  everything  must  be  regulated  as  if  society  were  the 
result  of  an  express  convention,  or  rather  of  a  retroactive  contract 
mutually  agreed  upon.  The  difficulty  is  to  determine  the  conditions 
which  individual  associates  would  demand  as  the  price  of  their 
adhesion  to  the  terms  of  the  contract.  We  shall  have  to  imagine 
what  they  would  demand  were  they  able  to  make  fresh  terms. 

But  we  are  not  much  farther  ahead  after  all,  for  the  individual 
himself  knows  nothing  at  all  about  it.  Renouncing  the  attempt  to 
solve  the  insoluble,  one  has  to  fix  some  kind  of  minimum  claim  which 
the  disinherited  may  reasonably  expect  to  see  fulfilled.  Such  a 
minimum  claim  would  be  a  guarantee  against  the  ordinary  risks  of  life. 
Society  would  become  a  kind  of  association  for  mutual  insurance, 
with  the  good  and  bad  fortune  spread  out  equally  over  everybody.3 

1  Bourgeois,  op.  dt.,  p.  94. 

*  Even  the  texts  of  the  Civil  Code  seem  to  point  to  some  such  theory. 
Article  1370,  in  addition  to  the  cases  of  quasi -con  tract  and  quasi -misdemeanour 
of  which  it  speaks,  also  mentions  "  law  "  as  a  general  cause  of  obligation. 

*  "Wherever  it  is  impossible  to  fix  definitely  the  value  of  the  personal  effort 
put  forth  by  a  single  individual,  as  in  the  case  of  a  quasi-contract — that  is, 
whenever  it  is  impossible  to  determine  the  value  of  the  debt  on  the  one  hand  or 
the  credit  on  the  other — the  best  plan  is  to  pool  those  risks  and  advantages.    This 
would  mean  that  none  would  know  who  is  really  bearing  the  risk  or  who  is 
reaping  the  advantages,  the  risks  being  shared  by  everybody  and  the  advantages 
being  thrown  open  to  everyone."    (Ibid.,  p.  81.) 

The  end  of  the  quotation  apparently  contradicts  the  statement  we  have 


598  THE  SOLIDARISTS 

But  a  quasi-contract  is  something  very  different  from  this. 
Contracts  and  quasi-contracts  are  based  upon  the  giving  and  receiving 
of  equivalent  values,  do  ut  des,  whereas  mutual  insurance  is  a  kind 
of  substitute  for  direct  liability.  A  contract  is  essentially  indivi- 
dualistic— mutualism  is  primarily  socialistic. 

This  idea  of  a  quasi-contract  contributed  not  a  little  to  the 
success  of  M.  Bourgeois's  theory,  but  it  makes  no  vital  contribu- 
tion to  the  doctrine  itself,  and  he  might  very  easily  have  omitted 
it  altogether.1  It  is  nothing  better  than  an  artifice,  almost  a  logo- 
machy, invented  for  the  express  purpose  of  affording  some  kind  of 
justification  for  demanding  a  legal  contribution  by  treating  it  as 
an  implicit  or  retroactive  contract.  It  is  more  of  a  concession  to 
individual  liberty  than  anything  else.  A  taxpayer  grumbles  at  a 
tax  which  goes  to  provide  pensions  for  the  old,  but  it  is  pointed 
out  to  him  that  the  contribution  is  owing  from  him  in  virtue 
not  of  an  explicit  agreement  perhaps,  but  at  least  of  a  quasi- 
agreement. 

But  what  useful  purpose  can  be  served  by  such  ironical  subter- 
fuge ?  If  it  can  be  shown  that  owing  to  inferior  moral  education 
the  law  must  have  the  making  of  a  conscience  for  those  who  have 
none,  and  must  enforce  a  certain  minimum  of  social  duties  which 
appear  necessary  for  the  preservation  of  life  and  the  perpetuation  of 
social  amenities,  what  is  that  but  a  form  of  State  Socialism  ?  If  it 
is  pointed  out,  on  the  other  hand,  that  moral  progress  consists  in 
transforming  debts  into  duties  2  rather  than  vice  versa,  one  readily 
realises  that  it  is  best  to  multiply  the  number  of  free  institutions  of 
a  solidarist  complexion,  such  as  mutual  aid  and  co-operative  societies, 
trade  unions,  etc. 

Another  objective  which  the  quasi-contract  theory  had  in  view 
was  to  supply  the  debtor  with  a  kind  of  guarantee  that  nothing 

italicised,  in  which  he  speaks  of  pooling  risks  and  advantages.  With  regard  to 
the  latter,  it  is  enough,  apparently,  to  secure  equal  opportunity.  It  is  not  very 
obvious  why  the  principle  should  be  so  rigidly  enforced  in  the  one  case  and  so 
reluctantly  in  the  other.  If  the  principle  of  solidarity  holds  me  responsible  for 
the  degradation  of  the  drunkard  in  the  one  case,  is  there  any  reason  why  I 
should  not  be  allowed  to  share  in  the  good  fortune  of  the  lucky  speculator  in 
another  ?  Is  it  because  the  logical  application  of  this  principle  would  directly 
lead  to  communism  ? 

1  One  should  add  that  the  word  "  quasi-contract  "  is  not  so  frequently  used 
by  M.  Bourgeois  as  it  is  by  his  disciples.  As  in  many  another  instance,  the 
disciples  have  outdone  the  master.  In  his  Philosophic  de  la  Solidariti  he  scarcely 
uses  the  term  at  all,  but  seems  to  prefer  to  speak  of  mutualisation. 

1  Such  seems  to  be  the  ideal  of  Guyau,  the  philosopher,  in  his  charming 
volume,  Etquifse  d'une  Morale  sans  Obligation  ni  Sanction, 


THE  SOLIDARIST  THESIS  599 

would  be  required  of  him  beyond  the  exact  equivalent  of  his  debt.1 
But,  as  we  have  already  noted,  it  would  be  a  somewhat  illusory 
guarantee,  because  it  is  almost  impossible  to  determine  the  amount 
of  the  debt  in  the  first  place.  Since  the  amount  of  this  debt  is  in 
some  way  to  be  fixed  by  law  it  may  be  well  to  begin  with  it. 

Should  the  legislator  find  himself  driven  to  accept  M.  Bourgeois's 
valuation,  the  demands  made  upon  the  taxpayer  will  not  be  so 
exorbitant  after  all.  The  whole  mass  of  obligations  is  summed  up 
under  three  heads : 

1.  Free  education  for  all  classes  of  the  community.     Intellectual 
capital  more  than  any  other  kind  of  capital  is  a  collective  good,  and 
should  never  be  other  than  common  property,  upon  which  every 
one  may  draw  whenever  he  wishes.     A  necessary  corollary  would 
be  a  shorter  working  day. 

2.  A  minimum  of  the  means  of  existence  for  everybody.     It  is 
difficult  to  imagine  a  retroactive  contract  which  refuses  to  grant 
men  the  right  to  live.     Regarded  in  this  light,  the  "  guarantism  "  of 
Sismondi  and  Fourier,  the  "  right  to  work  "  of  Louis  Blanc  and 
Considerant,  gain  new  significance  and  throb  with  fresh  vitality. 

3.  Insurance  against  the  risks  of  life,  which,  being  fortuitous,  are 
escaped  by  none.     We  know  the  promptness  with  which  the  feeling 
of  kinship  is  aroused  whenever  one  of  these  accidents  happens  on  a 
scale  somewhat  larger  than  usual  and  assumes  the  proportions  of  a 
catastrophe.     Why  should  it  be  otherwise  when  a  single  individual 
falls  a  victim  to  the  fickleness  of  fate  ? 

If  M.  Bourgeois  has  given  his  theory  a  distinctly  politico-legal 
bias,  M.  Durkheim  has  taken  good  care  to  approach  the  question 
from  the  standpoint  of  moralist  and  sociologist. 

M.  Durkheim  draws  a  distinction  between  two  kinds  of 
solidarities. 

The  first  of  these,  which  he  regards  as  a  quite  inferior  type, 
depends  upon  external  resemblances,  and  is  of  a  purely  mechanical 
character,  like  the  cohesion  of  atoms  in  a  physical  body.  The  other, 
which  consists  of  a  union  of  dissimilars,  is  the  result  of  division  of 
labour,  and  of  such  is  the  union  between  the  various  members  of 
the  human  body.  Durkheim  regards  this  kind  of  unity  as  of 
immense  significance,  not  so  much  because  of  its  economic  conse- 
quence as  of  its  important  moral  results,  **  which  might  even  supply 

1  "  The  only  thing  that  justice  demands  ia  the  payment  of  debt ;  beyond 
that  we  have  no  right  to  impose  any  obligation  whatsoever."  (Bourgeois,  »j>. 
cit.,  pp.  45  and  56.) 


600  THE  SOLIDAEISTS 

the  basis  of  a  new  moral  order."  Seeing  that  individuals  really 
follow  divergent  paths,  the  struggle  for  existence  cannot  be  quite 
so  keen  as  it  is  generally  supposed  to  be,1  and  this  differentiation 
between  the  individual  and  the  mass  enables  the  former  to  dissociate 
himself  from  the  collective  conscience.  Durkheim's  desire  was  to 
see  the  new  ethic  developed  by  the  professional  associations ;  hence 
the  important  rdle  which  trade  unionism  holds  in  his  philosophy. 

Without  disputing  the  validity  of  the  distinction  thus  made,  we 
may  be  allowed  to  question  the  advisability  of  treating  one  kind 
of  solidarity  with  such  contempt  and  of  showing  such  enthusiasm 
for  the  other.  Our  hope  is  that  the  future  lies  with  the  former  kind. 
For  what  is  the  object  of  evolution  if  it  is  not  to  make  what  seems 
similar  really  alike?  The  world  is  not  merely  marching  in  the 
direction  of  greater  differentiation;  it  is  also  moving  towards  a 
deeper  unity.  This  seems  a  well-established  fact,  at  least  so  far  as 
the  physical  world  is  concerned.  Mountains  are  brought  low  and 
the  hollow  places  filled.  Heat  is  dissipated  throughout  space, 
causing  minute  gradations  of  temperature,  and  the  establishment  of 
a  kind  of  final  equilibrium.2  The  same  law  applies  to  human 
beings.  Differences  of  caste,  of  rank,  of  manners  and  customs,  of 
language  and  measurements,  are  everywhere  being  obliterated.  And 
it  seems  by  this  time  a  tolerably  well-established  fact  that  the 
wars  of  the  past  were  wars  between  strangers — strangers  in  race 
or  religion,  in  culture  or  education — and  consequently  it  was 
between  people  who  were  dissimilar  that  they  appeared  most 
violent.  Therefore  the  march  towards  unity  also  represents  a 
movement  in  the  direction  of  peace.3 

1  "  Thanks  to  this  fact,  rivals  need  not  seek  to  eliminate  one  another,  but 
may  well  be  content  to  exist  side  by  side.  Specialisation  is  undertaken,  our 
author  thinks,  not  with  the  idea  of  producing  more,  as  the  economists  seem  to 
teach,  but  merely  with  a  view  to  enabling  us  to  exist  under  the  new  conditions 
of  life  which  await  us."  (Division  du  Travail.) 

*  "  Every  brook  that  flows,  every  lamp  that  burns,  every  word  spoken, 
every  gesture  made,  betokens  a  movement  in  the  direction  of  the  greater 
uniformity  of  the  universe."     (Lalande,  La  Dissolution.) 

•  This  is  the  sense  in  which  solidarity  has  been  understood  by  the  Lausanne 
philosopher  Charles  Seoretan,  in  his   book  La  Civilisation  et  la  Croyance,  and 
the  same  point  of  view  has  been  adopted  by  M.  Alfred  Fonillee.     "  Solidarity," 
writes  Fouillee,  "  has  all  the  practical  value  of  an  ideal  force.    The  recognition 
of  the  profound  identity  which  pervades  humanity  and  the  adoption  of  an  ideal 
of  perfect  unity  as  the  supreme  object  of  rational  desire  must  assume  the  form 
of  a  duty  in  the  eyes  of  every  human  being.     We  should  anticipate  the  unity 
of  the  human  race,  which  is  as  yet  far  from  being  realised,  and  which  will  never 
be  perfect  perhaps,  by  acting  as  if  we  were  already  one."     (Revue  de»  Deux 
Mondea,  July  15,  1901.) 


APPLICATION  OF  SOLIDARIST  DOCTRINES       601 

Such  a  conception  of  solidarity  seems  more  akin  to  the  idea? 
which  we  have  formed  respecting  it,  and  has  by  far  the  greatest 
moral  value;  for  if  I  am  to  be  responsible  for  the  evil  that  has 
befallen  another,  or  to  be  considered  an  accomplice  in  the  evil 
which  he  has  done,  that  can  only  be  just  in  proportion  to  the 
extent  to  which  that  other  is  also  myself.1  The  practical  result 
will  be  a  preference  for  such  modes  of  association  as  will  group  men 
together  according  to  some  general  characteristic — a  co-operative 
association  rather  than  a  trade  union ;  for  while  the  interest  of  the 
latter  is  in  opposition  both  to  that  of  the  producer  and  that  of  the 
public,  the  method  of  association  in  the  former  case  is  the  most 
general  imaginable,  for  everyone  at  some  time  or  other  must  be 
regarded  as  a  consumer. 


Ill :   THE  PRACTICAL  APPLICATION  OF 
SOLIDARIST  DOCTRINES  « 

THERE  is  no  such  thing  as  a  Solidarist  school  in  the  sense  in  which 
we  speak  of  a  Historical,  a  Liberal,  or  a  Marxian  school.  Solidarity 
is  a  banner  borne  aloft  by  more  than  one  school,  and  a  philosophy  that 
serves  to  justify  aims  that  are  occasionally  divergent.  As  we  have 
already  had  occasion  to  point  out,  the  solidarists  are  more  of  a  political 
party  than  a  doctrinal  school,  and  their  best  work  has  been  done  in 
association  with  the  Radical-Socialist  party.  Behind  them  is  the  State 
Socialist  or  "  interventionist  "  school.  It  has  been  suggested  that  the 
social  legislation  of  the  last  twenty  years,  such  as  the  regulations 
governing  the  conditions  of  labour,  factory  and  general  hygiene,  in- 
surance against  accidents  and  old  age,  State  aid  for  the  aged  and  the 
disabled,8  the  establishment  of  societies  for  mutual  credit,  rural  banks 

1  Auguste  Comte,  in  his  vernal  authoritative  manner,  declared  that  solidarity 
rests  upon  the  fact  that  men  can  represent  one  another,  and  consequently  may 
be  held  responsible  for  one  another. 

*  See  a  collection  of  addresses  by  various  authors,  published  under  the  title 
of  Let  Applications  societies  de,  la  Solidaritt  (1904). 

*  These  laws  of  public  assistance  are  among  the  most  remarkable  practical 
manifestations  of  the  solidarist  movement.     They  are  quite  a  new  feature  in 
French  public  life,  and  until  their  appearance  relief,  whether  given  by  the  State, 
the  department,  or  the  commune,  was  purely  optional  (except  in  a  few  isolated 
cases,  such  as  in  that  of  waifs  and  strays).     To  mention  only  the  principal  ones  in 
France,  the  law  of  July  15, 1893,  made  relief  in  the  form  of  medical  attendance  for 
all  destitute  invalids  obligatory  upon  the  communes.    The  law  of  July  14,  1905, 
extended  a  similar  benefit  to  all  invalids  and  to  all  persons  over  seventy  year* 
of  age  in  the  form  of  pensions  varying  in  amount  from  60  to  240  franca  per 
annum  (360  in  Paris).   Finally,  the  law  of  April  5,  1910,  secures  a  pension  to  all 
workmen  at  the  age  of  sixty,  the  charge  being  divided  between  the  State,  the 

B.D.  0 


602  THE  SOLIDARISTS 

and  cheap  cottages,  and  school  clinics,  all  of  which  are  the  direct 
outcome  of  preaching  solidarity,  as  well  as  the  grants  in  aid  of  these 
objects  which  are  paid  out  of  the  progressive  taxation  levied  upon 
inherited  wealth  or  extraordinary  incomes  of  such  as  have  plucked 
the  fruit  from  the  tree  of  civilisation  to  the  deprivation  of  those 
who  caused  that  fruit  to  grow,  should  be  known  as  "  the  laws  of 
social  solidarity." 

Nor  are  workmen  the  only  class  who  are  likely  to  benefit  by  the 
adoption  of  this  principle.  The  Protectionist  or  Nationalist  party 
claims  to  be  the  party  of  solidarity,  as  well  as  the  mutualists,  who 
employ  the  term  oftener  than  anyone  else.  When  the  taxpayer 
complains  about  the  taxes  which  he  has  to  pay  in  order  to  grant  a 
bounty  to  certain  proprietors  or  manufacturers,  and  the  consumer 
grumbles  because  the  levying  of  import  duties  results  in  increasing 
his  cost  of  living,  the  reply  is  that  the  spirit  of  solidarity  demands 
that  preference  should  be  given  to  their  own  kith  and  kin.1  ' 

Fiscal  reform,  with  its  twofold  attribute  of  a  progressive  tax  at 
one  end  of  the  scale  and  total  exemption  at  the  other,  also  claims  to 
be  solidarist.  Progressive  taxation  is  justified  on  the  ground  that 
bhose  who  have  made  their  fortunes  are  the  debtors  of  society, 
while  exemption  at  the  other  end  is  only  fair,  seeing  that  the  dis- 
inherited have  nothing  to  give,  but  have  already  a  strong  claim 
upon  society. 

However  closely  akin  to  State  Socialism  practical  solidarism  may 
appear,  the  fact  that  the  latter  may  achieve  its  results  merety  by 
means  of  associationism  is  sufficient  to  distinguish  it  from  the 
former.  The  result  is  that  it  has  given  quite  a  fresh  impetus  to  the 
associative  movement.  Syndicalists,  mutualists,  and  co-operators 
vie  with  one  another  in  their  anxiety  to  swear  allegiance  to  the 

employers,  and  the  workmen  themselves.  It  is  a  kind  of  payment  made  b}'  the 
members  of  the  present  generation  to  the  survivors  of  a  past  one.  This  relief  is 
clearly  of  the  nature  of  a  social  debt,  and  justifies  us  in  treating  it  as  the  out- 
come of  a  quasi -contract/f or  on  the  one  hand  it  constitutes  an  obligation  fixed 
by  law  on  the  part  of  the  commune,  the  department,  or  the  State,  as  the  case 
may  be — an  obligation  which  they  cannot  escape — and  on  the  other  hand  a  right 
on  the  part  of  the  beneficiary,  as  in  the  case  of  a  creditor  in  an  action  for  the 
recovery  of  debt. 

1  A  very  curious  application  of  this  national  solidarity  has  come  to  light 
quite  recently.  Formerly  the  French  Government  would  only  sanction  foreign 
loans  if  the  borrowing  country  promised  to  apply  some  part  of  its  funds  to  French 
industry.  That  meant  linking  the  rentier  and  the  French  manufacturers  by  a 
forced  kind  of  solidarity,  the  first  being  unwilling  to  lend  money  unless  that 
money  in  some  way  returned  to  the  second  person  for  goods  purchased.  This 
is  just  where  the  claim  of  the  workers,  who  justly  demand  a  minimum  wage, 
comes  in. 


APPLICATION  OF  SOLTDARIST  DOCTRINES       603 

principle  of  free  solidarism  as  distinct  from  the  forced  solidarism  of 
the  State  Socialists.1  It  is  not  that  they  fail  to  recognise  the  neces- 
sity for  the  latter  and  its  superiority  over  free  competition,  but  on 
moral  grounds  they  think  that  such  forced  solidarism  is  even  inferior 
to  competition.  It  is  imperative,  however,  that  we  should  make 
some  distinction  between  such  heterogeneous  elements  as  enter  into 
the  composition  of  the  solidarist  party. 

The  syndicalists,  who  come  first,  will  hear  of  nothing  except 
trade  unionism,  which  is  to  become  the  basis  of  a  new  economic 
organisation  and  a  new  kind  of  ethics.  The  sense  of  solidarity  is  in 
this  case  very  strong,  because  the  syndicat  poses  as  the  sworn 
foe  of  the  bourgeoisie.  Nothing  develops  this  sense  like  a  struggle, 
and  the  struggle  becomes  a  means  of  discipline.  The  attempts  made 
by  the  trade  unionists  to  enforce  this  solidarity,  not  only  upon  their 
own  members,  but  also  upon  workmen  who  are  unwilling  to  enrol 
themselves  as  members  of  the  union,  the  antagonism  shown  for 
the  jaunes,  and  the  advent  of  the  solidarist  or  sympathetic  strike, 
constitute  one  of  the  most  interesting  aspects  of  the  syndicalist 
movement. 

Next  came  the  mutualists,  who  are  loudest  and  most  persistent 
in  their  appeal  to  solidarity.*  It  is  not  difficult  to  understand  this 
when  we  realise  the  battle  which  they  wage  against  the  ills  of 
life — invalidity,  old  age,  poverty,  and  death.  It  is  just  here  that 
men  most  feel  the  need  of  sticking  together.  But  if  we  are  to  judge 
by  the  sacrifices  which  they  make,  the  sense  of  solidarity  among 
the  mutualists  themselves  is  not  very  great.  They  are  loud  in 
their  demands  that  the  State  or  the  commune,  or  even  voluntary 
subscribers,  should  complete  what  they  have  begun,8  and  that  the 

1  The  doctrine  of  quasi-contract  might  lead  to  the  one  conclusion  as  well 
as  to  the  other.  M.  Bourgeois  himself  seems  to  incline  rather  in  the  direction 
of  associationism.  "  The  Radical  party  has  a  social  doctrine,  a  doctrine  that 
might  be  summed  up  in  one  word — association."  (Preface  to  M.  Buisson's 
La  Politique  radicale.) 

1  "  The  Apotheosis  of  Solidarity,"  printed  in  large  type,  recently  appeared 
as  a  headline  in  one  of  the  French  morning  papers.  The  reference  was  to  a 
banquet  of  30,000  mutualists. 

*  Mutualists  are  so  taken  up  with  the  idea  of  solidarity  that  they  indignantly 
protest  if  any  of  their  number  happens  to  make  use  of  the  term  "  beneficence  "  or 
"charity."  "Everyone  has  a  right  to  demand  his  own,"  they  say:  that  ia 
clearly  Bourgeois's  thesis.  On  the  other  hand,  their  journal,  L'Avenir  de  la 
Mutuality  for  February  1909  claims  that  societies  for  mutual  help  have  a  right  to 
organise  tombolas  and  lotteries,  and  they  base  their  case  upon  the  law  of  May  21, 
1836,  which  reserves  the  right  of  lottery  to  "efforts  of  an  entinly  charitable 
character."  In  order  to  defend  its  claim,  L'Avenir  de  la  Mifrml  tt  does  not 
hesitate  to  affirm  that  the  societies  for  mutual  help  "recognise  the  cxiatenco  of 


604  THE  SOLIDARISTS 

State  should  delegate  to  them  the  task  of  establishing  workmen's 
pensions  and  of  dispensing  State  aid.  Containing  as  they  do  some 
members  of  the  middle  classes  as  well  as  employees,  they  show  no 
pronounced  revolutionary  leanings,  nor  have  they  even  a  plan  of 
social  reorganisation. 

Co-operation,  on  account  of  its  scope  and  the  variety  of  its 
aims,  has  some  claim  to  be  regarded  as  in  a  measure  a  realisation 
of  the  ideals  of  solidarism.  But  co-operation  presents  a  twofold 
aspect  with  different  programmes  and  aims  that  are  not  always 
easily  reconcilable.  The  oldest  movements  in  which  the  fraternal 
tradition  of  1848  may  still  be  viewed  in  all  its  pristine  vigour  are  the 
producers'  associations,  of  which  we  have  already  spoken.  Their 
ideal  is  to  emancipate  the  worker  by  setting  up  a  kind  of 
industrial  republic,  and  they  make  a  practical  beginning  with 
"  guarantism,"  which  Sismondi  expected  the  masters  to  give  and 
which  Fourier  thought  would  naturally  follow  the  establishment 
of  the  Phalanst^re.1  But  however  rosy  the  prospects  may  be  they 
can  never  affect  more  than  a  very  small  proportion  of  the  working 
classes. 

Distributive  societies  have  met  with  a  greater  measure  of  success. 
Their  membership  is  reckoned  by  the  million,  and  in  some  towns  in 
England,  Germany,  and  Switzerland  the  members  actually  comprise 
the  majority  of  the  population.  Such  is  the  colossal  magnitude  of  the 
"  wholesale  "  that  it  might  even  alter  the  whole  character  of  com- 
mercial organisation — that  is,  if  we  are  to  judge  not  merely  by  the 
record  of  its  transactions,  but  also  by  the  feeling  of  awe  which  it 
inspires  in  the  minds  of  merchants  in  all  countries,  who  are  already 
claiming  the  protection  of  their  respective  Governments.  Although 
the  number  of  such  societies  is  rapidly  increasing  in  France,  they 
have  never  had  quite  the  same  practical  influence  there,  simply 
because  they  have  been  lacking  in  the  true  spirit  of  solidarity. 
Curiously  enough,  these  French  co-operators  have  formulated  a 

an  element  of  benevolence  which  is  not  exactly  mutual  and  which  is  rightly 
connected  with  the  superior  modern  principle  of  social  solidarity,  but  which 
none  the  less  justifies  the  application  of  the  law  of  1836." 

1  "  Solidarity  is  just  an  empty  word  if  it  is  not  supported  by  special  organisms 
which  can  render  it  effective.  This  is  why  workmen's  associations  have  deemed 
it  necessary  to  establish  what  they  call '  guarantism.' .  .  . 

"  The  most  unmistakable  manifestation  of  solidarity  consists  in  the  employ- 
ment of  a  part  of  the  wealth  produced  by  labour  in  order  to  repair  the  poverty 
caused  by  the  deficient  organisation  of  labour,  which  leaves  the  worker  and  his 
family  liable  to  the  acutest  suffering  whenever  illness,  old  age,  or  misfortune 
crosses  their  paths."  (Programme  on  the  cover  of  a  journal  known  as 
tion  ouvritrc,  the  organ  of  the  producers'  associations./ 


APPLICATION  OF  SOLIBARIST  DOCTRINES        605 

most  ambitious  programme  of  social  reform,  which  is  wholly  inspired 
by  the  experience  of  the  Rochdale  Pioneers.1 

1  This  co-operatiat  programme  is  generally  known  in  France  aa  that  of 
the  ficole  de  Nimea.  Really  it  is  a  development  of  the  suggestions  thrown 
out  by  the  Rochdale  Pioneers  in  1844.  M.  Bourgeois,  who  gives  it  a  place 
in  his  Syatemct  aociolistes,  considers  that  it  is  a  little  indefinite.  It  seems  to 
us,  on  the  other  hand,  to  be  about  aa  precise  as  any  of  the  other  socialist 
systems  that  attempt  to  envisage  the  future ;  and  it  has  this  advantage,  that  ita 
prophecies  are  already  in  process  of  realisation  in  a  fashion  that  is  most  unmis- 
takable. See  a  brief  risumt  of  the  programme  in  a  lecture  by  Gide  on  the 
occasion  of  the  centenary  of  the  French  Revolution,  published  in  the  volume 
entitled  Go-operation  (Dei  Transformation!  qtte  la  Go-operation  at  appttec  a 
rtaliter  dans  I'Ordre  iconomique), 

The  task  of  reorganising  society  belongs,  not  to  the  producers,  but  to  the 
consumers,  for  while  the  former  are  inspired  by  the  co-operative  spirit,  the  latter 
are  imbued  with  enthusiasm  for  the  general  well-being.  Consumers  have  only 
to  unite  and  all  their  wants  are  satisfied  just  in  the  way  they  desire,  for  they  can 
either  buy  directly  from  the  producers  all  that  they  need,  or  they  can,  when 
they  have  become  sufficiently  rich  and  powerful,  produce  for  themselves  in 
their  own  factories  and  on  their  own  lands.  This  would  mean  the  abolition  of 
all  profits,  those  of  middlemen  and  manufacturers  alike.  The  societies  would 
retain  only  as  much  as  would  be  necessary  for  the  further  extension  of  the  move- 
ment, returning  all  the  rest  to  the  consumers  in  proportion  to  the  amount  of 
their  purchases.  We  have  already  had  occasion  to  note  how  this  idea  of  the 
abolition  of  profits  had  haunted  John  Stuart  Mill,  and  how  it  seemed  linked 
with  an  entirely  new  phase  of  social  evolution,  to  which  he  gave  the  name  of 
the  "  stationary  State."  We  have  also  witnessed  the  Hedonists'  arrival  at 
exactly  the  same  conclusion,  though  along  a  directly  opposite  path,  namely, 
that  of  absolutely  free  competition. 

We  must  not  lose  sight  of  the  fact  that  this  revolution  is  accomplished 
without  affecting  the  foundations  of  the  social  order — property,  inheritance, 
interest,  etc. — and  without  having  recourse  to  any  measure  of  expropriation  save 
such  as  naturally  results  from  the  free  play  of  present  economic  laws.  Co- 
operators  have  no  desire  to  interfere  with  accumulated  capital,  their  aim  being 
merely  to  form  new  capital  which  shall  render  the  old  useless.  If  existing 
capital  is  merely  accumulated  profits  made  out  of  labour,  why  should  not  labour 
itself  make  a  profit,  and  this  time  keep  it  for  its  own  use  ? 

Complaints  have  been  made  that  a  system  of  this  kind,  even  if  it  were  realised, 
would  not  result  in  the  abolition  of  the  wage-earner,  seeing  that  the  workers 
would  still  be  employed,  the  only  difference  being  that  their  employer  would 
be  a  society  instead  of  an  individual.  The  reply  is  that  a  person  who  works 
for  a  society  of  which  he  himself  is  a  member  is  very  near  to  being  his  own 
master. 

Moreover,  has  anyone  a  right  to  raise  this  objection  T  The  upholder  of  the 
present  economic  order  certainly  has  not  when  we  remember  that  he  considers 
the  wage  contract  to  be  the  definite  type  of  pure  contract.  Neither  are  the  oolleo- 
tivista  entitled  to  make  it,  for  under  their  system  everybody  would  be  a  civil 
servant.  Hence  the  only  persons  who  are  really  justified  in  making  this  criti- 
cism are  those  who  believe  that  the  future  will  see  an  increase  in  the  number 
of  independent  proprietors.  The  reply  that  we  would  make  to  them  is  this  i 
The  only  hope  of  seeing  this  realised — which  is  also  the  ideal  ofsome  oo-operaton— 


606  THE  SOLIDARISTS 

The  gospel  of  solidarity  has  even  penetrated  into  the  rural 
districts,  and  although  the  temperament  of  the  peasant  is  strongly 
individualistic  it  is  already  beginning  to  bear  fruit  in  the  shape  of 
numerous  associations  of  various  kinds.  The  most  interesting  of 
these  is  the  mutual  credit  society,  which  implies  collective  respon- 
sibility for  social  debts.1 

This  by  no  means  exhausts  the  practical  consequences  of  the 
solidarist  ideal.  One  notable  result  which  has  already  shown  itself 
is  a  serious  modification  of  the  whole  conception  of  the  rights  and 
attributes  of  private  property.  The  old  formula  in  which  property 
was  spoken  of  as  a  social  trust  rather  than  as  a  strictly  individualistic 
right  at  the  dominiurn  ex  jure  Quiritium,  but  which  until  quite 
recently  was  nothing  more  than  a  mere  metaphor,  becomes  a  reality 
under  the  inspiration  of  this  new  doctrine  of  solidarity.  Once  it  is 
realised  that  property  is  simply  the  result  of  the  unconscious  co- 
operation of  a  large  number  of  causes,  most  of  which  are  impersonal, 
the  tendency  will  be  to  eliminate  it  altogether  or  to  adapt  it  more 
and  more  to  collective  ends.  M.  Alfred  Fouillee,2  a  French  philo- 
sopher, aptly  put  this  aspect  of  the  question  when  he  spoke  of  social 
co-proprietorship  being  grafted  on  to  individual  property. 

The  modifications  introduced  into  the  study  of  jurisprudence 
by  emphasising  its  solidarist  aspect  are  occasionally  spoken  of  as 
"  juridical  socialism,"  a  term  that  is  not  very  clear,  to  say  the  least. 
The  jurists  who  have  undertaken  the  task  of  applying  this  new 
principle  to  the  study  of  jurisprudence  have  not  merely  adopted  the 
quasi-contract  theory  as  the  basis  of  their  work  of  reconstruction, 
but  have  also  refused  to  recognise  any  absolute  rights  of  property  ; 
in  other  words,  they  claim  that  the  proprietor  has  other  responsi- 
bilities besides  the  mere  exercise  of  those  rights  (gui  suo  jure  utitur 
neminem  Icedere  videtur). 

Instead  of  emphasising  the  new  principle  known  as  the  "  abuse  of 
rights,"  they  prefer  to  claim  the  complete  subjection  of  all  private 
rights  to  the  public  weal.  They  point  to  a  thousand  instances  in 

is  to  set  up  producers'  associations  under  the  control  and  protection  of  consumers' 
societies.  In  fact,  a  regime  of  federated  co-operative  societies  is  not  incom- 
patible with  the  maintenance  of  a  certain  amount  of  autonomous  production, 
thanks  to  various  considerations  which  need  not  be  detailed  here. 

1  In  France  this  rule  of  solidarity  has  as  yet  only  been  adopted  by  a  Catholic 
group  of  credit  societies  known  as  the  Union  Durand.  It  may  be  practised  by 
a  few  other  societies  there,  but  it  is  quite  obviously  the  exception,  whereas  in 
some  German  societies  and  in  Italian  and  Swiss  associations  the  rule  is  alwaj's 
followed — another  proof  that  although  the  idea  is  French  in  origin  we  must  look 
elsewhere  for  practical  applications. 

8  La  Propriele  sociale  et  la  Democratic. 


CRITICISM  607 

which  a  proprietor  ought  to  be  held  responsible,  though  through  no 
fault  of  his  own,  for  the  results  following  from  the  discharge  of  his 
economic  duties.1  The  existence  of  such  a  thing  as  an  acquired 
right  is  also  denied,  chiefly  on  the  ground  that  fictitious  rights  of 
this  kind  bar  the  way  to  progress  by  setting  up  a  claim  for  indemnity.1 


IV:  CRITICISM 

NOTWITHSTANDING  the  popularity  of  the  term  "  solidarity  "  and  the 
numerous  attempts  made  to  give  effect  to  the  doctrine  of  which  we 
have  just  given  a  summary  account,  it  would  be  a  mistake  to 
imagine  that  the  theory  has  met  with  sympathy  everywhere.  On 
the  contrary,  it  has  been  subjected  to  the  liveliest  criticism,  especially 
by  the  Liberal  economists. 

It  is  not  that  the  Liberals  deny  the  existence  of  solidarity  or 
disapprove  of  the  results  which  follow  from  its  operation.  The 
discovery  of  the  law  of  solidarity  under  the  familiar  aspect  of 
division  of  labour  and  exchange  constitutes  a  part  of  their  own 
title  to  fame,  and  extravagant  were  the  eulogiums  which  they 
bestowed  upon  its  working. 

They  do,  however,  hold  firmly  to  the  belief  that  economic 
solidarity  is  quite  sufficient,  and  that  it  is  also  the  best  imaginable, 
despite  the  fact  that  it  may  be  our  duty  to  organise  it  afresh.  Is  it 
possible  to  improve  upon  a  system  of  division  of  functions  which 
gives  everyone,  every  day  of  his  life,  the  equivalent  of  the  service 

1  The  result  is  that  masters  are  nowadays  held  responsible  whenever  a 
workman  meets  with  an  accident,  or  falls  ill  even.  They  are  also  liable  to  damages 
whenever  they  pay  off  their  men.  Owners  of  urban  property  are  no  longer 
allowed  to  build  according  to  their  fancy,  and  any  property  set  up  in  contra- 
vention of  the  sanitary  regulations  is  immediately  demolished.  Further  progress 
along  these  lines  would  lead  to  juridical  socialism.  See  Lea  Transformation* 
du  Droit  civil,  by  M.  Charmont,  and  Lt  Droit  social  et  U  Droit  individuel,  by 
M.  Duguit. 

*  Anton  Menger,  of  Vienna,  is  the  protagonist  of  this  view.  See  his  book, 
Das  biirgerliche  JKecht  und  die  besitzlosen  Volksklassen  (1890).  Another  of  his 
works,  Das  Recht  auf  den  vollen  Arbeitsertrag,  which  has  been  translated  into 
English  and  contains  a  valuable  preface  by  Professor  Foxwell  Menger,  maintains 
that  at  the  basis  of  the  economic  order  are  three  fundamental  rights  which  may 
be  compared  with  the  political  demands  put  forward  in  the  Peclaration  of  the 
Rights  of  Man.  These  rights  are  :  (1)  the  right  to  the  whole  produce  of  labour, 
(2)  the  right  to  work,  (3)  the  right  to  exist — all  of  which  claims  were  put  forward 
by  Considerant,  Louis  Blanc,  and  Proudhon,  the  French  socialists  of  1848. 

See  also  Lassalle's  book,  Das  System  der  erworbenen  Rechte.  Mention  should 
also  be  made  of  M.  Emmanuel  Levy  de  Lyon,  who  has  published  several  article* 
of  this  kind,  especially  the  pamphlet  entitled  Capital  et  Travail. 


608  THE  SOLIDARISTS 

which  he  has  rendered  to  society  ?  Bastiat  in  his  fable  The  Blind 
and  ike  Paralytic  compares  this  distribution  of  social  effort  to  an 
understanding  between  two  such  persons,  whereby  the  blind  does 
the  walking  and  the  maimed  indicates  the  direction. 

Members  of  this  school  are  strongly  of  the  opinion  that  it  is 
quite  enough  to  let  this  principle  of  each  for  all  work  itself  out 
under  the  pressure  of  competition.  And  as  a  matter  of  fact  is  it 
not  to  the  interest  of  the  producer  to  consult  the  wants  and  tastes 
and  even  the  fancies  of  the  public  ?  Altruism  pursued  in  this  spirit, 
as  it  well  might  be,  manifests  itself  as  an  incessant  desire  to  satisfy 
the  wants  of  others,  and  even  to  live  for  others.  It  loses  none  of 
its  force  by  becoming,  instead  of  a  mere  ideal,  a  professional  necessity 
which  no  producer  can  afford  to  neglect  without  running  the  risk 
of  failure.1  And  it  is  not  only  between  producers  and  consumers, 
but  also  between  capital  and  labour,  that  such  solidarity  exists. 
Neither  can  produce  without  the  other,  and  the  interest  of  both 
is  to  have  as  large  a  produce  as  possible.  A  similar  kind  of  solidarity 
exists  among  nations.  The  richer  our  neighbours  are  the  better 
chance  of  our  finding  an  outlet  for  our  products. 

Moreover,  none  of  these  solidarites  but  is  essentially  just,  since 
everyone  receives  the  exact  equivalent  of  what  he  gives.  What 
can  the  new  doctrine  of  solidarity  add  to  this,  unless  it  be,  perhaps, 
an  element  of  pure  parasitism  ?  2 

For  what  is  the  essence  of  the  new  doctrine  if  it  is  not  that  those 
members  of  society  who  are  possessed  of  a  certain  superiority 
of  position,  either  material  or  intellectual  (which  is  very  often  the 
result  of  the  greater  contribution  which  they  have  made  to  the 
material  or  intellectual  capital  of  society),  by  a  bold  inversion  of 
their  material  positions  should  find  themselves  treated  as  the 

1  "  The  producer  is  concerned  about  the  well-being  of  his  clients  at  every 
moment.  His  sympathies  are  wide  enough  to  include  the  whole  of  humanity. 
The  merchant  and  the  transport  agent  are  always  on  the  look-out  for  what 
will  prove  most  advantageous  to  those  for  whom  they  are  working,  as  well  as 
for  new  clients — that  is,  for  more  persons  to  whom  they  can  be  of  service."  These 
words,  which  might  have  been  written  by  Bastiat,  are  taken  from  a  small  yet 
curious  volume  published  by  M.  Yves  Guyot,  and  entitled  La  Morale  de  la 
Concurrence. 

•  "  Solidarity  serves  aa  a  pretext  for  those  people  who  want  to  enjoy  the 
fruits  of  the  labour  of  others  without  taking  a  part  in  such  labours  themselves, 
and  for  politicians  who  want  to  win  adherents  to  their  cause  ;  it  is  just  a  new 
name  for  an  unhealthy  kind  of  egoism."  (Vilfredo  Pareto,  Le  Peril  socialise, 
in  the  Journal  des  Sconomistes,  May  15,  1900.) 

"  The  solidarist  theories  would  simply  greatly  increase  the  number  and 
incapacity  of  the  unemployable."  (Demolins,  La  Superiorite  des  Anglo-Saxons.} 


CRITICISM  609 

debtors  of  such  as  have  not  succeeded  ?  The  natural  result  is  that 
there  are  springing  up  everywhere  in  society  whole  classes  who  are 
living  upon  the  claims  of  solidarity,  just  as  their  predecessors  lived 
upon  the  claims  of  Christian  charity.  More  daring  than  their  for- 
bears, they  have  none  of  the  humility  of  the  ordinary  beggar,  but 
boldly  demand  their  due ;  not  for  the  love  of  God,  as  was  wont 
with  the  true  mendicant,  but  in  the  name  of  some  quasi-contract, 
with  a  policeman  within  hailing  distance  lest  the  debtor  should  not 
acquit  himself  in  a  sufficiently  graceful  fashion.  Hence  the  swarm 
of  pensioners  and  semi-invalids,  of  unemployed  who  patronise  the 
relief  works,  and  of  victims  of  accidents  more  or  less  real,  of 
parents  who  have  their  children  reared  for  nothing,  of  manufacturers 
and  proprietors  who  make  a  profit  directly  or  indirectly  out  of  the 
existence  of  public  rights,  and  of  public  servants  who  in  the  name 
of  professional  solidarity  trample  national  solidarity  underfoot  and 
sacrifice  the  interests  both  of  taxpayer  and  consumer. 

The  economists  have  never  held  the  doctrine  that  commutative 
justice  by  itself — mere  do  ut  des — is  enough.  Adjacent  to  the  realm 
of  justice  lies  the  domain  of  charity.  But  to  annex  this  zone  to  the 
dominion  of  justice  and  to  claim  solidarity  as  a  justification  seems 
utter  futility. 

There  is  no  avoiding  this  dilemma.  Either  they  get  the  equi- 
valent of  what  they  give,  which  is  the  case  under  a  system  of  free 
exchange,  or  they  do  not — in  which  case  they  must  be  either  getting 
more  or  less.  In  other  words,  they  are  either  parasites  or  destitutes — 
a  case  of  exploitation  or  of  charity. 

It  is  further  pointed  out  that  the  whole  trend  of  evolution  appears 
to  give  no  countenance  to  this  doctrine  of  solidarity,  and  that 
consequently  it  is  of  the  nature  of  a  retrograde  movement.  Even 
in  the  biological  realm  we  come  across  what  looks  like  a  persistent 
effort  to  attain  independence  or  autonomy,  a  struggle  on  the  part 
of  the  individual  to  free  himself  from  the  trammels  of  his  descent.1 
Such  must  be  the  explanation  of  the  recent  heroic  efforts  to  leave 
the  earth  and  rise  towards  the  skies,  and  the  consequent  exultation 
which  the  aviator  feels  when  he  finds  that  he  has  overcome  the 

1  "  The  distinctive  feature  of  evolution  seems  to  be  the  growing  tendency 
among  organisms  to  attain  to  a  position  of  independence  by  acquiring  a  certain 
degree  of  specialised  skill."  (De  Launay,  L'Histoire  de  la  Terre.)  The  crystal's 
action,  says  de  Launay,  in  grouping  itself  in  the  form  of  a  polyhedron  is  an 
expression  of  independence  as  well  as  a  means  of  defence.  The  crystal  is 
simply  the  earliest  individual  to  break  away  from  ite  environment.  The 
animal  form  in  the  ocean  depths  that  carries  in  Its  own  body  the  essentials 
of  a  new  environment  marks  a  second  step. 

B.D.  ^ 


610  THE  SOLIDARISTS 

force  of  gravity  and  broken  the  last  link  which  bound  man  to  his 
mother  earth.  Turning  to  criminal  law,  we  are  met  with  similar 
considerations  there.  The  collective  responsibility  of  the  whole 
family  or  tribe  seemed  quite  just  to  the  primitive  mind,  and  the  sons 
of  the  Atridse  and  the  descendants  of  Adam  suffered  with  hardly  a 
murmur  for  the  sins  committed  by  their  parents.1  But  to  us  the 
doctrine  is  simply  revolting.  Whenever  such  penalties  are  demanded 
by  nature  we  can  only  submit  with  the  best  grace  that  we  can 
command.  We  are  reluctantly  bound  to  admit  that  the  innocent 
does  suffer  for  the  faults  of  others — that  the  child  perishes  because 
the  parent  was  a  drunkard.  But  we,  at  any  rate,  regard  such  things 
as  evil,  and  valiantly  struggle  against  them.  We  are  not  much 
given  to  raising  altars  to  Eumenides.  When  solidarity  breeds 
contamination  we  seek  to  counteract  it  by  a  strict  individualism 
that  immunes.  The  innumerable  fetters  that  had  been  riveted 
together  by  the  old  co-operative  regime  were  ruthlessly  torn  off  by 
the  French  Revolution.  Why  attempt  to  forge  new  chains  by 
giving  to  each  individual  a  hypothetical  claim  upon  his  fellows  ? 

The  moralists  in  their  turn  have  also  raised  objections.  They 
want  to  know  what  new  principle  of  morality  solidarity  professes  to 
teach.  When  it  has  been  shown  that  my  neighbour's  illness  may  easily 
compass  my  own  death,  what  new  feeling  will  the  mere  proving  of 
this  beget  in  me  ?  Will  it  be  love  ?  Is  it  not  much  more  likely  to 
reveal  itself  as  a  desire  to  keep  him  as  far  from  me  as  possible — to 
get  rid  of  him  altogether  like  a  plague-stricken  rat,  or  at  least  to 
see  that  he  is  locked  up  in  some  sanatorium  or  other  ?  I  may 
perhaps  be  found  more  willing  to  contribute  towards  the  upkeep 
of  the  sanatorium,  but  the  dominant  motive  will  be  fear,  or  self- 
interest,  if  that  word  seems  preferable.2 

Thus  solidarity,  while  it  does  not  seem  to  contain  any  new 
doctrine  of  love,  tends  to  weaken  and  to  suppress  the  sense  of 
responsibility  by  treating  society  as  a  whole,  or  at  least  the 
social  environment,  as  the  source  of  our  errors,  our  vices  and 

1  "The  primitive  era  was  an  age  of  solidarity.  Crime  was  no  individual 
thing  then,  and  that  the  innocent  should  suffer  for  the  sake  of  the  guilty  seemed 
a  part  of  the  order  of  things.  It  is  only  in  an  age  of  reflection  that  such  dogmas 
appear  absurd."  (Renan,  Avenir  de  la  Science,  p.  307.) 

1  Anti-kissing  leagues,  inspired  not  by  any  puritan  motives,  but  arising 
solely  out  of  fear  of  bacilli,  have  been  formed  in  the  United  States.  One 
mm-t  not  be  surprised  if  a  league  against  hand-shaking  is  established  next ; 
although  this  would  be  rather  a  curious  result  of  a  doctrine  of  solidarity  that 
is  always  represented  by  the  device  of  two  hands  clasped  in  one  another  ! 

In  Paul  Bureau's  book  La  Crist  morale  des  Temps  nouveaux  there  is  a  lengthy, 
lively  criticism  of  solidarism  from  the  moral  standpoint. 


CRITICISM  611 

crimes.  Individual  responsibility,  however,  is  the  very  basis  of 
morality. 

Such  are  the  criticisms  preferred  by  individualist  economists.  It 
would  be  a  mistake  to  imagine,  however,  that  the  socialists,  the 
anarchists,  or  the  syndicalists  have  treated  the  doctrine  with  any 
greater  degree  of  indulgence.  The  proposal  to  reconcile  masters  and 
workmen,  rich  and  poor,  in  a  kind  of  silly,  sentimental  embrace  is  a 
menace  to  socialism  and  a  denial  of  the  principle  of  class  war.1 

All  such  criticism,  however,  utterly  fails  to  convince  us.  It  may 
be  well,  perhaps,  to  get  rid  of  the  coercive  element  in  the  discharge 
of  social  debt,  but  that  does  not  do  away  with  the  valuable  contribu- 
tion made  by  solidarity  both  to  social  economics  and  to  ethics. 

Solidarity  by  itself  does  not  furnish  a  principle  of  moral  conduct, 
since  it  is  just  a  natural  fact,  and  as  such  it  is  non-moral.  Whenever 
we  imagine  that  solidarity  is  something  evil,  that  judgment  in 
itself  is  a  proof  that  we  have  had  recourse  to  some  criterion 
outside  solidarity  itself  by  which  to  judge  of  its  good  or  evil  features. 
It  is  quite  possible  also  that  the  idea  may  be  exploited  for  the  profit 
of  the  egoist.  If  solidarity  is  nothing  but  a  mere  cord  binding  us 
together  it  may  quite  possibly  happen  that  it  will  be  used  to  exalt 
some  people  and  to  pull  others  down,  and  the  number  brought  low 
may  even  exceed  the  number  raised  up.  We  need  not  be  surprised 
if  occasionally  we  find  that  instead  of  increasing  the  power  of 
good  we  have  extended  the  opportunity  for  evil.  But  we  must 
speed  the  coming  of  these  new  powers  in  the  hope  that  in  the  end 
good  will  triumph  over  evil.  Solidarity  by  itself  cannot  furnish  a 
rule  of  moral  conduct  to  such  as  have  none  already ;  but,  granting 
the  existence  of  a  moral  principle,  it  matters  not  whether  it  be 
egoism  or  altruism,  solidarity  supplies  us  with  a  leverage  of  incom- 
parable strength. 

In  short,  it  teaches  us  three  important  lessons  : 

1.  It  shows  us  that  all  the  good  which  has  happened  to  others 
has  added  to  our  own  well-being,  and  that  all  the  evil  that  has 
befallen  them  has  done  us  harm,  and  that  consequently  we  ought 
to  encourage  the  one  and  discourage  the  other,  so  that  a  policy  of 
indifferent  abstention  is  no  longer  possible  for  any  of  us. 

The  mode  of  action  prescribed  may  be  frankly  utilitarian,  but 
there  is  an  element  of  triumph  in  getting  the  egoist  to  forget  himself 

1  This  is  how  we  find  it  appraised  in  Lt  Mouvemeni  sdcialisle :  "  The  develop 
ment  of  solidarism  is  one  of  the  most  disquieting  features  of  the  present  tiuu>. 
It  affords  a  proof  as  well  as  being  a  cause  of  a  considerable  slackening  of  energy. " 
(Issue  for  July  1907  ;  Paul  Olivier  in  a  review  of  Bougie's  book  on  solidftrism.) 


612  THE  SOLIDARISTS 

and  to  remember  others,  even  though  it  be  but  for  a  time.  A  heart 
that  beats  for  others,  though  the  reason  perhaps  be  selfish,  is  a 
somewhat  nobler  heart.  It  is  doubtful  whether  we  can  ever  get 
pure  altruism  without  some  admixture  of  self-interest.  The  Gospel 
only  asks  that  we  should  love  our  neighbour  as  ourselves.  Solidarity 
makes  a  similar  demand,  neither  more  nor  less,  but  undertakes  to 
prove  that  the  neighbour  is  really  myself. 

2.  It  shows  us  how  the  results  of  our  actions  return  upon 
ourselves  with  their  harvest  of  suffering  or  joy  a  thousand  times 
increased.  This  gives  it  its  character  for  solemnity  and  majesty 
which  has  made  it  such  an  exceedingly  favourable  instrument  for 
moral  education.  To  our  care  is  entrusted  the  welfare  of  souls, 
and  just  as  we  are  led  to  see  that  we  never  really  had  a  right  to  say 
that  this  or  that  matter  was  no  concern  of  ours,  so  we  also  find 
ourselves  relieved  of  that  other  equally  heinous  maxim,  namely, 
that  certain  matters  concern  ourselves  alone.  Far  from  weakening 
the  sense  of  responsibility,  as  some  writers  maintain,  it  is  obvious 
that  it  increases  it  indefinitely. 

8.  It  is  true  that  in  a  contrary  fashion  it  renders  us  more  indulgent 
of  the  faults  of  others,  by  showing  how  often  we  have  been  uncon- 
scious accomplices  in  their  crime.  Morally  this  is  a  gain,  for  it  helps  us 
to  be  more  indulgent  towards  others,  but  more  severe  upon  ourselves. 

From  the  standpoint  of  sociological  evolution  we  are  confronted 
with  the  dissolution  of  many  of  the  older  forms  of  solidarity  and 
with  the  emergence  of  new  ones.  What  really  takes  place  is  an 
extension  of  the  circle  of  solidarity  through  the  family,  the  city,  and 
the  nation  until  it  reaches  humanity — such  expansion  being  accom- 
panied by  a  doubly  fortunate  result.  On  the  one  hand  corporate 
egoism  becomes  so  ennobled  and  extended  that  it  includes  the 
whole  of  humanity,  with  the  result  that  the  strife  between  antago- 
nistic interests  becomes  less  acute.  The  old  argument  from 
independence  had  already  grown  blunt  in  the  struggle  with  division 
of  labour.  Degree  of  independence  is  not  the  sole  measure  of 
personality.  The  savage  beneath  his  ancestral  tree  is  independent, 
and  so  perhaps  is  Ibsen's  hero  in  revolt  against  society.  The  king 
on  his  throne,  on  the  other  hand,  who  never  speaks  except  in  the 
plural  number,  is  always  conscious  of  his  dependence.  But  the 
savage  because  of  his  independence  is  powerless,  whereas  the  king 
because  of  his  dependence  is  very  powerful.  Solidarity,  whether  it 
be  like  the  rope  that  binds  the  Alpine  climber  to  his  guide  which 
may  lead  them  .both  to  the  abyss,  or  like  the  patriotism  that 
rivets  the  soldier's  gaze  upon  his  country's  flag,  cannot  detract 


CRITICISM  613 

from  individuality.  If  it  be  true,  as  was  said  just  now,  that  the 
crystal  is  the  earliest  effort  of  the  individual  to  render  itself  inde- 
pendent of  its  environment,  we  must  never  forget  that  it  is  also  the 
earliest  realisation  of  true  solidarity  in  the  form  of  association. 

As  to  the  argument  of  the  economists  that  mere  exchange  is  the 
only  form  of  solidarity  that  is  at  all  compatible  with  the  demands 
of  justice,  all  the  schools  whose  fortunes  we  have  followed  in  the 
course  of  this  volume  have  declared  against  this  view,  not  excepting 
even  the  Mathematical  school,  the  latest  offspring  of  the  Classical 
tradition.  Esau's  bargain  with  Jacob,  the  contracts  between  the 
Congo  Company  and  the  blacks,  or  bet  ween  the  entrepreneur  and  the 
home-worker,  are  irreproachable  from  a  Hedonistic  standpoint  (see 
p.  540).  But  no  one  would  consider  sunh  primitive  exchanges,  which, 
as  Proudhon  eloquently  remarks,  savour  of  retaliation — an  eye  for  an 
eye  and  a  tooth  for  a  tooth — as  evidence  of  the  existence  of  solidarity 

Even  if  we  conceived  of  exchange  as  a  balance  the  two  sides  of 
which  are  in  equilibrium,  it  is  impossible  to  escape  the  conclusion 
that  the  contracting  parties  fare  rather  differently  when  they  do 
not  start  on  a  footing  of  complete  equality.  There  is  always  a 
Brennus  ready  to  throw  his  sword  into  the  scales. 

It  is  only  natural  that  we  should  ask  ourselves  what  is  to  be 
done  under  such  circumstances.  Must  we  be  content  simply  to  resign 
ourselves  to  our  fate  ?  This  seems  inevitable  if  it  be  true,  as  the 
economists  seem  to  suggest,  that  human  relations  depend  entirely 
upon  exchange  and  its  derivatives — selling,  lending,  wage-earning, 
etc.  But  it  is  quite  otherwise  when  these  human  relations  are 
regarded  as  the  outcome  of  association,  whether  professional, 
mutualist,  or  co-operative.1 

In  this  spirit  the  worker  subscribes  to  his  union  with  a  view  to 
increasing  its  strength.  Undoubtedly  he  reckons  upon  getting  a 
higher  wage,  but  there  is  no  necessary  relation  between  his  member- 
ship of  the  union  and  the  eventual  rise  in  wages  which  he  expects. 
The  mutualist  supports  his  society  in  the  hope  that  he  may  add  to 
the  general  feeling  of  security.  Undoubtedly  in  his  case  again  he 
reckons  upon  the  society  paying  his  doctor  should  he  fall  ill,  but 

1  Association,  even  when  the  object  in  view  is  purely  mercenary,  has  a  moral 
value  superior  to  exchange : 

(1)  Inasmuch  as  it  always  implies,  in  addition  to  money  payment,  a  certain 
sacrifice  of  time  and  trouble,  perhaps  even  of  independence.     It  involves  some- 
thing more  than  the  obligation  to  attend  meetings  and  to  conform  to  rules. 

(2)  It  implies  something  more  than  a  mere  act  of  exchange  which  is  com- 
pleted in  an  instant  and  at  one  stroke.     It  implies  the  indefinite  collaboration 
of  the  parties  concerned. 


614  THE  ANARCHISTS 

scores  of  members  pass  through  life  without  making  any  demand 
upon  their  society  at  all,  contributing  much  more  than  they  with- 
draw. In  this  way  the  good  lives  pay  for  the  bad  ones.  The 
member  of  the  co-operative  society,  in  a  similar  fashion,  is  more 
concerned  about  a  fuller  satisfaction  of  his  need  than  he  is  about 
the  amount  of  profit  that  he  can  get  out  of  it.  In  short,  whereas 
under  a  competitive  system  each  one  tries  to  get  rid  of  his  neighbour, 
under  a  regime  of  association  everyone  would  try  to  make  some  use 
of  him.  The  object  of  solidarity  is  to  substitute  "  each  for  all  "  as 
a  principle  of  action  instead  of  "  each  for  himself."  x  Every  step 
taken  in  this  direction,  whether  we  wish  it  or  no,  implies  a  movement 
away  from  the  regime  of  exchange  in  the  direction  of  solidarity. 


CHAPTER  IV:  THE  ANARCHISTS 

THE  social  creed  of  the  anarchist  is  a  curious  fusion  of  Liberal 
and  socialist  doctrines.  Its  economic  criticism  of  the  State,  its 
enthusiasm  for  individual  initiative,  as  well  as  its  conception  of  a 
spontaneous  economic  order,  are  features  which  it  owes  to  Liberalism ; 
while  its  hatred  of  private  property  and  its  theory  of  exploitation 
represent  its  borrowings  from  socialism. 

Doctrinal  fusions  of  this  kind  which  seek  to  combine  two  extreme 
standpoints  not  infrequently  outdo  them  both.  Dunoyer,  for 
example,  was  the  extremest  of  Liberals,  but  he  took  great  care  to 
remind  his  readers  of  at  least  one  function  which  none  but  the  State 
could  perform :  no  other  authority,  he  thought,  could  ever  under- 
take to  provide  security.  True  bourgeois  of  1830  that  he  was, 
Dunoyer  always  considered  that  "  order "  was  a  prime  social 
necessity.2  But,  armed  with  the  criticism  of  the  socialists,  the 
anarchists  soon  get  rid  of  this  last  vestige  of  the  State's  prerogative. 
In  their  opinion  the  security  of  which  Dunoyer  spoke  merely  meant 

1  The  solidarist  regime  must  be  distinguished  from  the  exchange  regime  on 
the  one  hand  and  from  charity  on  the  other.    Exchange  implies  giving  some- 
thing with  a  view  to  obtaining  the  exact  equivalent.     Charity,  on  the  other 
hand,  implies  giving  without  expecting  any  return  ;  hence  it  involves  a  sacrifice. 
Solidarity  also  implies  a  sacrifice :  every  appeal  on  behalf  of  solidarity  is  based 
upon  the  consciousness  of  a  certain  amount  of  sacrifice,  but  a  sacrifice  that  is 
not  entirely  disinterested — it  is  the  sacrifice  of  a  part  of  the  individual  self  in 
order  to  gain  an  equal  share  in  the  collective  being. 

2  Sec  his   article  on   Government   in  the  Didionnaire    of    Coquelin    and 
Guillaumin. 


THE  ANARCHISTS  615 

the  security  of  proprietors;  "order"  is  only  necessary  for  the 
defence  of  the  possessors  against  the  attack  of  the  non-possessors. 
The  socialists  themselves  (with  the  exception  of  Fourier,  perhaps, 
whom  the  anarchists  claim  as  one  of  themselves),  however  opposed 
to  private  property,  were  exceedingly  anxious  to  retain  considerable 
powers  in  the  hands  of  the  State,  such  as  the  superintendence  of 
social  production,  for  example.  Armed  this  time  with  the  criticism 
of  the  Liberal  school,  the  anarchists  experience  no  difficulty  in 
demonstrating  the  economic  and  administrative  incapacity  o£  the 
State.  "  Liberty  without  socialism  means  privilege,  and  socialism 
without  liberty  means  slavery  and  brutality  " — so  writes  Bakunin.1 
It  is  only  fitting  that  a  few  pages  at  the  end  of  this  book  -should 
be  devoted  to  a  doctrine  that  attempts  to  fuse  the  two  great  social 
currents  that  strove  so  valiantly  for  the  upper  hand  in  nineteenth- 
century  history. 

It  is  not  our  first  acquaintance  with  anarchy,  however.  It  has 
already  been  given  a  "  local  habitation  and  a  name  "  by  Proudhon, 
who  is  the  real  father  of  modern  anarchism.  This  does  not  imply 
that  similar  doctrines  may  not  be  discovered  in  writings  of  a  still 
earlier  date,  as  in  Godwin's,  for  example.  But  such  writers  remained 
solitary  exceptions,2  while  the  links  connecting  the  anarchical  teaching 
of  Proudhon  with  the  political  and  social  anarchy  of  the  last  thirty 
years  are  easily  traced.  Not  only  is  the  similarity  of  ideas  very  striking, 
but  their  transmission  from  Proudhon  to  Bakunin,  and  thence  to 
Kropotkin,  Reclus,  and  Jean  Grave,  is  by  no  means  difficult  to 
follow. 

Alongside  of  the  political  and  social  anarchism  which  form  the 
principal  subject  of  this  chapter  there  is  also  the  philosophical 
and  literary  anarchism,  whose  predominant  characteristic  is  an 
almost  insane  exaltation  of  the  individual.  The  best  known  repre- 
sentative of  this  school,  which  hails  from  Germany,  is  Max  Stirner, 
whose  book  entitled  Der  Einzige  und  sein  Eigenthum  appeared  in 
1844.3  The  work  was  forgotten  for  a  long  time,  although  it  enjoyed 

1  (Euvrea,  vol.  i,  p.  59  (F&ifralisme,  Socialisms,  et  Antithiologisme). 

1  Adler  in  his  article  A  narchismus  in  the  Handwdrttrbuch  der  Staatswisstn 
tchaften,  and  in  his  Oeschichte  dea  Sozidlismua  und  Kommunismua  (1899),  shows 
the  indebtedness  of  the  anarchist  ideal  to  Greek  philosophy. 

1  The  work  was  republished  in  1882  and  again  in  1893,  and  translated  into 
French  in  1902.  There  are  also  a  few  translations  from  the  writ  rgs  of  Smith 
and  Say  from  his  pen.  A  very  interesting  account  of  his  life,  to  which  we  most 
acknowledge  our  indebtedness  for  some  of  the  information  given  hero,  is  to  be 
found  in  J.  H.  Mackay's  Max  Stirner,  «etn  Lebenund  &in  Work  (Berlin,  1898). 
Stirner's  real  name  was  Kaspar  Schmidt.  Born  m  1806  at  Uayreuth,  in 
Bavaria,  he  died  at  Berlin  in  extreme  poverty  and  wretchedness  in  1866.  Foi 


616  THE  ANARCHISTS 

a  striking  success  when  it  first  appeared.  Some  twenty  years  ago, 
just  when  Nietzsche  was  beginning  to  win  that  literary  renown 
which  is  so  unmistakably  his  to-day,  it  was  seen  that  in  Stirner  he 
had  a  precursor,  although  Stirner's  works  probably  remained  quite 
unknown  to  Nietzsche  himself,  with  the  result  that  Stirner  has 
since  enjoyed  posthumous  fame  as  the  earliest  immoraliste.  A  few 
words  only  are  necessary  to  show  the  difference  between  his  doctrines 
and  those  of  Proudhon,  Bakunin,  and  Kropotkin.1 


I :  STIRNER'S  PHILOSOPHICAL  ANARCHISM  AND  THE 
CULT  OF  THE  INDIVIDUAL 

STIRNER'S  book  was  written  as  the  result  of  a  wager.  The  nature 
of  the  circumstances  and  the  character  of  the  epoch  that  gave  birth 
to  it  were  briefly  these.  Stirner  was  a  member  of  a  group  of  young 
German  Radicals  and  democrats  whom  Bruno  Bauer  had  gathered 
round  him  in  1840.  They  drew  their  inspiration  from  Feuerbach, 
and  accepted  the  more  extreme  views  of  the  Hegelian  philosophy. 
Their  ideal  was  the  absolute  freedom  of  the  human  spirit,  and  in 
the  sacred  name  of  liberty  they  criticised  everything  that  seemed  in 
any  way  opposed  to  this  ideal,  whether  nascent  communism, 
dogmatic  Christianity,  or  absolute  government.  The  intellectual 
leaders  of  the  German  Revolution  of  1848  were  drawn  from  this 
group,  but  they  were  soon  swept  aside  in  the  reaction  of  1850.  A 
few  of  them  who  were  in  the  habit  of  meeting  regularly  in  one  of 
the  Berlin  restaurants  assumed  the  name  die  Freien.  Marx  and 
Engels  occasionally  joined  them,  but  soon  left  in  disgust.  Their 
joint  pamphlet,  which  bears  the  ironical  title  of  The  Holy  Family, 
is  supposed  to  refer  to  Bauer  and  his  friends.  A  few  of  the  German 
Liberal  economists,  including  Julius  Faucher  among  others,  paid 
occasional  visits  to  the  Hippel  Restaurant.  Max  Stirner,  who  was 
one  of  the  most  faithful  members  and  a  most  attentive  listener, 

an  account  of  the  "  left  Hegelian  school "  and  of  Stirner  himself  see  the  very 
interesting  articles  of  Saint-Rene  Taillandier  published  in  the  Revue  det  Deux 
Mondes,  1842-60. 

1  Some  may  perhaps  wonder  why  Nietzsche  is  not  included,  especially 
as  he  was  a  successor  of  Stirner's.  But  Nietzsche's  interests  were  always 
exclusively  philosophical  and  ethical.  Stirner's  work,  on  the  other  hand,  is 
mainly  social  and  political.  We  have  already  pointed  out  that  even  StirnerV 
book  has  only  a  rather  remote  connection  with  economics,  and  a  detailed  study 
of  it  would  be  more  in'  keeping  with  a  history  of  political  ideas.  Nietzsche's 
work  would  lead  us  still  farther  afield,  and  would  force  us  to  examine  every 
individualistic  doctrine  as  it  cropped  up. 


STIRNER'S  PHILOSOPHICAL  ANARCHISM         617 

although  it  does  not  seem  that  he  contributed  much  to  the  discussion, 
conceived  the  idea  of  preparing  a  surprise  for  his  friends  hi  the  form 
of  a  book  in  which  he  attempted  to  prove  that  the  criticism  of  the 
supercritics  was  itself  in  need  of  criticism. 

The  extreme  Radicals  who  formed  the  majority  of  the  group 
were  still  very  strongly  attached  to  a  number  of  abstract  ideas 
which  to  Stirner  seemed  little  better  than  phantoms.  Humanity, 
Society,  the  Pure,  and  the  Good  seemed  so  many  extravagant 
abstractions ;  so  many  fetishes  made  with  hands  before  whom 
men  bow  the  knee  and  show  as  much  reverence  as  ever  the 
faithful  have  shown  towards  their  God.  Such  abstractions,  it 
seemed  to  him,  possess  about  as  much  reality  as  the  gods  of 
Olympus  or  the  ghosts  that  people  the  imagination  of  childhood. 
The  only  reality  we  know  is  the  individual ;  there  is  no  other.  Every 
individual  constitutes  an  independent  original  force,  its  only  law  its 
own  personal  interest,  and  the  only  limit  to  his  development  consists 
in  whatever  threatens  that  interest  or  weakens  its  force.  Every 
man  has  a  right  to  say,  "  I  want  to  become  all  that  it  is  within  my 
power  to  become,  and  to  have  everything  I  am  entitled  to."  * 
Bastiat  had  already  expressed  it  as  his  opinion  that  there  could 
be  no  conflict  of  legitimate  rights,  and  Stirner  declares  that  "  every 
interest  is  legitimate  provided  only  it  is  possible."  "  The  crouching 
tiger  is  within  his  rights  when  he  springs  at  me ;  but  so  am  I  when 
I  resist  his  attacks."  "  Might  is  right,  and  there  is  no  right  without 
might."  • 

Granting  that  the  individual  is  the  only  reality,  all  those  collective 
unities  that  go  by  the  name  of  the  family,  the  State,  society,  or  the 
nation,  and  all  of  which  tend  to  limit  his  individuality  by  making 
the  individual  subservient  to  themselves,  at  once  become  meaning- 
less. They  are  devoid  of  substance  and  reali ty. 8  Whatever  authority 
they  possess  has  been  ascribed  to  them  by  the  individual.  Mere 
creatures  of  the  imagination,  they  lose  every  right  as  soon  as  I 
cease  to  recognise  them,  and  it  is  only  then  that  I  become  a  really 
free  man.  "  I  have  a  right  to  overthrow  every  authority,  whether  of 

1  Der  Einzige  und  aein  Eigenthum  (ed.  Reklam),  p.  164.       *  Ibid.,  p.  225. 

*  "  This  man  has  a  body,  and  so  has  this  man,  and  that  man,  right  through 
society,  so  that  you  have  a  collection  of  bodies  and  not  one  collective  body.  Society 
has  several  bodies  at  its  disposal,  but  has  no  body  of  its  own.  Just  like  the 
parallel  notion  of  a  nation,  this  corporate  body  is  a  mere  phantom — an  idea 
with  no  corporeal  existence."  (Ibid.,  p.  135.)  To  make  the  possession  of  a  body 
the  test  of  reality  is  surely  gross  materialism.  At  this  rate,  law,  custom,  and 
language  would  have  to  be  considered  unreal.  A  historical  fact  such  as  a  battle 
or  a  revolution  has  no  body,  but  it*  real  consequence*  are  often  palpable  enough. 


618  THE  ANARCHISTS 

Jesus,  Jehovah,  or  God,  if  I  can.  I  have  a  right  to  commit  a  murder 
if  I  wish  it — that  is  to  say,  unless  I  shun  a  crime  as  I  would  a  disease. 
I  decide  the  limits  of  my  rights,  for  outside  the  ego  there  is  nothing. 
...  It  may  be  that  that  nothing  belongs  to  no  one  else ;  but 
that  is  somebody  else's  affair,  not  mine.  Self-defence  is  their 
own  look-out."  1  The  workers  who  complain  of  exploitation,  the 
poor  who  are  deprived  of  all  property,  have  just  one  thing  which  they 
must  do.  They  must  recognise  the  right  to  property  as  inherent  in 
themselves  and  take  as  much  of  it  as  they  want.  "The  egoist's 
method  of  solving  the  problem  of  poverty  is  not  to  say  to  the  poor, 
*  Just  wait  patiently  until  a  board  of  guardians  shall  give  you 
something  in  the  name  of  the  community,'  but  'Lay  your  hands 
upon  anything  you  want  and  take  that.'  The  earth  belongs  to  him 
who  knows  how  to  get  hold  of  it,  and  having  got  hold  of  it  knows 
how  to  keep  it.  If  he  seizes  it,  not  only  has  he  the  land,  but  he  has 
the  right  to  it  as  well."  a 

But  what  kind  of  a  society  would  we  have  under  such  condi- 
tions ?  It  would  simply  be  a  "  Union  of  Egos,"  each  seeking  his  own 
and  joining  the  association  merely  with  a  view  to  greater  personal 
satisfaction.  Present-day  society  dominates  over  the  individual, 
making  him  its  tool.  The  "  Union  of  Egos  " — for  we  cannot  call  it  a 
society — would  be  simply  a  tool  in  the  hand  of  the  individual.  No 
scruples  would  be  felt  by  anyone  leaving  the  union  if  he  thought  some- 
thing was  to  be  gained  by  such  withdrawal.  Every  individual  would 
just  say  to  his  neighbour,  "  I  am  not  anxious  to  recognise  you  or 
to  show  you  any  respect.  I  simply  want  you  to  be  of  some  service  to 
me."  8  It  would  be  a  case  of  bellum  omnium  contra  omnes,  with  occa- 
sional precarious  alliances.  But  it  would  at  least  mean  liberty  for  all. 

Such  strange,  paradoxical  doctrines  are  irrefutable  if  we  accept 
Stirner's  postulates.  But  we  must  reject  his  whole  point  of  view 
and  dispute  the  stress  laid  upon  the  individual  as  the  only  reality, 
as  well  as  his  denial  of  the  reality  of  society.  Granting  that  the 
individual  is  the  only  reality,  then  society  and  the  nation  are  mere 
abstractions  created  by  man  and  removable  at  his  pleasure.  But 
that  is  just  the  mistake.  The  individual  has  no  existence  apart 
from  society,  nor  has  he  any  greater  degree  of  reality.  He  is  simply 
an  element,  not  a  separate  entity.  His  existence  or  non-existence 
does  not  depend  upon  himself.  Nor  is  society  merely  an  idea.  It 
is  a  natural  fact.  The  individual  may  be  quite  as  appropriately 
described  as  an  abstraction  or  a  mere  phantom, 

1  Der  Einzige  und  sein  Eigenthum,  p.  222. 

*  Ibid.,  p.  223.  »  Ibid.,  p.  164. 


SOCIAL  AND  POLITICAL  ANARCHISM  619 

The   fundamental    difference    between    Stirner    and    the    other 

anarchists  who  will  engage  our  attention  is  just  this  recognition  of 

the  reality  of  the  social  fact  which  Stirner  denies  in  toto.     It  also 

marks  the  cleavage  between  literary  and  political  anarchism.1 


i 


II :   SOCIAL  AND  POLITICAL  ANARCHISM  AND  THE 
CRITICISM  OF  AUTHORITY 

STIRNER  spent  his  life  between  his  study  and  the  Hippel  Restaurant, 
the  rendezvous  of  his  friends.  Bakunin  and  Kropotkin  are  men  of  a 
different  stamp  who  have  risked  their  freedom,  and  even  their  lives, 
for  the  sake  of  the  cause  which  they  have  at  heart.  It  is  true  that 
the  seed  sown  in  the  mind  of  the  ignorant  as  the  result  of  their 
teaching  has  often  had  most  deplorable  results,  but  no  one  can 
deny  the  quality  of  courage  to  either  Kropotkin  or  Reclus,  or  with- 
hold from  them  the  title  of  greatness  both  of  mind  and  character. 

Bakunin  was  reared  in  much  the  same  intellectual  atmosphere 
as  Stirner.*  By  birth  he  belonged  to  the  Russian  nobility,  and 
spent  the  earliest  years  of  his  life  in  the  Russian  army.  In  1 884,  at 
the  age  of  twenty,  he  resigned  his  commission  in  order  to  devote 
himself  to  the  study  of  philosophy,  and,  like  Proudhon,  Stirner,  and 
Marx,  he  came  under  the  universal  spell  of  Hegel.  In  1840  he  pro- 
ceeded to  Berlin,  where  he  became  acquainted  with  the  school  of 
young  Radicals  of  whom  we  have  already  spoken.  From  1844  to 

1  In  a  pamphlet  called  Lea  Nouvcaux  Aspects  du  Socialisms  (Paris,  1908), 
written  by  a  syndicalist  of  the  name  of  Berth,  syndicalism  and  anarchism  are 
contrasted,  Proudhon's  emphasis  upon  the  reality  of  society  being  adopted  as 
the  crucial  test.  Unfortunately,  however,  Berth  confines  his  examination  to 
Stirner's  system.  Had  he  applied  the  test  to  Bakunin  or  Kropotkin  he  would 
have  discovered  that  the  emphasis  laid  by  them  upon  the  reality  of  society 
constitutes  the  most  original  feature  in  their  theory.  We  are  thus  driven  to 
the  exactly  opposite  conclusion,  and  feel  bound  to  admit — M.  Berth  notwith- 
standing— that  anarchism  and  syndicalism  in  many  respects  closely  resemble 
one  another.  Jean  Grave,  however,  as  we  shall  see  later,  seems  more  favourably 
inclined  towards  the  naive  individualism  of  Stirner. 

1  See  Bakunin's  Life,  written  by  his  friend  James  Guillaume,  included  in  the 
two-volume  edition  of  his  works ;  or  the  notice  of  him  prefaced  by  Dragomanov 
to  his  volume  Michail  Bakunin'a  sozial-politischer  Briefwechsel  mit  Herzen  und 
Ogareff  (Stuttgart,  1895).  A  fairly  full  biography — not  yet  published — has  been 
written  by  Nettlau,  and  a  copy  of  the  MS.  may  be  seen  in  the  Bibliotheque 
Nationale  at  Paris.  See  also  M.  Lagardelle's  article  on  Bakunin  in  the  Revue, 
politique  et  parlementaire  (1909).  Bakunin 's  works  have  been  published  in  French 
in  four  volumes,  the  first  of  which  was  issued  in  1895,  and  the  other  three  in 
1907, 1908,  and  1909  respectively  (Paris,  Stork).  Some  of  his  writings,  however, 
are  not  included  among  these,  e.g.  the  Statutes  of  the  International  Alliance  for 
Social  Democracy. 


620  THE  ANARCHISTS 

1847  we  find  him  in  Paris,  where  he  used  to  spend  whole  nights  in 
discussion  with  Proudhon.  Proudhon's  influence  upon  him  is  very 
marked,  and  one  constantly  meets  with  passages  in  the  writings  of 
the  Russian  anarchist  which  are  nothing  but  paraphrases  of  ideas 
already  put  forward  by  Proudhon  in  the  Idie  ginirale  de  la  Revolution 
au  XIX'  Si&clc.  The  year  1848  revealed  to  the  dilettante  nobleman 
his  true  vocation,  which  he  conceived  to  be  that  of  a  revolutionary. 
He  successively  took  part  in  the  risings  at  Prague  and  in  the  Saxon 
Revolution  at  Dresden.  He  was  arrested  and  twice  condemned  to 
death,  in  Saxony  and  again  in  Austria,  but  was  finally  handed  over 
to  the  Russian  authorities,  who  imprisoned  him  in  the  fortress  of  St. 
Peter  and  St.  Paul,  where  an  attack  of  scurvy  caused  him  to  lose  all 
his  teeth.  He  was  exiled  to  Siberia  in  1857,  but  managed  to  escape 
in  1861.  Making  his  way  to  London,  he  undertook  the  direction 
of  a  vigorous  revolutionary  campaign,  which  was  carried  on  in 
Switzerland,  Italy,  and  France.  During  the  years  1870  and  1871  he 
successfully  planned  a  popular  rising  at  Lyons.  Bernard  Lazare 
has  graphically  described  him  as  "  a  hirsute  giant  with  an  enormous 
head  which  seems  larger  than  it  really  is  because  of  the  mass  of 
bushy  hair  and  untrimmed  beard  which  surrounds  it.  He  always 
sleeps  rough,  has  no  roof  above  him,  and  no  homeland  which  he 
can  call  his  own,  and  like  an  apostle  is  always  prepared  to  set  out 
on  his  sacred  mission  at  any  hour  of  the  night  or  day." 

The  most  striking  fact  in  his  history  was  his  rupture  with  Karl 
Marx  at  the  last  International  Congress,  held  at  The  Hague  in  1872. 
Bakunin  joined  the  International  in  1869.  Disgusted  with  the 
pontifical  tendencies  of  the  General  Council,  which  was  entirely 
under  the  heel  of  Marx,  he  proposed  a  scheme  of  federal  organisation 
under  which  each  section  would  be  left  with  considerable  autonomy. 
The  Jura  Federation  supported  his  proposals,  and  so  did  several  of 
the  French,  Belgian,  and  Spanish  delegates,  as  well  as  all  the  Italian. 
But  he  was  expelled  from  the  International  by  Marx's  own  friends. 
The  official  rupture  between  Marxian  socialism  and  anarchy,  grown 
to  considerable  proportions  since,  dates  from  that  very  moment. 
That  Hague  congress  marks  also  the  end  of  the  International.  Marx 
soon  afterwards  transferred  the  centre  of  the  administration  to  the 
United  States,  and  no  conference  has  been  held  since.  Bakunin  also 
retired  from  the  struggle  about  the  same  time,  but  not  before  he 
had  set  up  a  new  association  at  Geneva,  composed  of  a  few  faithful 
friends.  In  1876  Bakunin  died  at  Berne. 

It  was  in  the  region  of  the  Jura,  in  the  neighbourhood  of  Neuchatel, 
where  Bakunin  had  still  a  few  followers  among  the  extremely 


SOCIAL  AND  POLITICAL  ANARCHISM  621 

individualistic  but  somewhat  mystical  population  of  those  parts, 
that  Kropotkin  in  the  course  of  a  short  stay  in  the  district  in 
1872  imbibed  those  anarchist  ideas  to  the  propagation  of  which 
he  has  so  strenuously  devoted  his  life.1  Although  personally  un- 
acquainted with  Bakunin,  Kropotkin  must  be  regarded  as  his  direct 
descendant. 

Prince  Kropotkin  is  also  a  Russian  aristocrat,  and  he,  like  his 
master,  joined  the  army  after  a  short  period  of  study.  He  attracted 
public  notice  first  of  all  as  the  author  of  several  remarkable  works 
dealing  with  natural  history  and  geography,  which  showed  him 
to  be  a  confirmed  disciple  of  Darwin.  But  science  was  by  no  means 
his  only  interest.  By  1871  Hegelian  influence  was  on  the  wane  in 
Russia,  and  the  more  thoughtful  of  the  younger  generation  turned 
their  attention  to  democracy.  The  new  watchword  was,  **  Go,  seek 
the  people,  live  among  them,  educate  them  and  win  their  confidence 
if  you  want  to  get  rid  of  the  yoke  of  autocracy."  Kropotkin  caught 
the  inspiration.  He  himself  has  told  us  how  one  evening  after 
dinner  at  the  Winter  Palace  he  drove  off  in  a  cab,  took  off  his  fine 
clothes,  and,  putting  on  a  cotton  shirt  instead  of  his  silk  one, 
and  boots  such  as  the  peasants  wore,  hurried  away  to  another 
quarter  of  the  city  and  joined  a  number  of  working  men  whom  he 
was  trying  to  educate.  But  his  propaganda  proved  short-lived,  for 
one  evening  when  he  was  leaving  the  headquarters  of  the  Geographical 
Society,  where  he  had  just  been  reading  a  paper  and  had  been  offered 
the  presidency  of  one  of  the  sections,  he  was  arrested  on  a  charge  of 
political  conspiracy  and  imprisoned  in  the  fortress  of  St.  Peter  and 
St.  Paul.  He  managed  to  escape  in  1876,  and  found  refuge  in 
England.  Afterwards  he  was  wrongfully  condemned  to  three  years' 
imprisonment  at  Clairvaux  on  account  of  his  supposed  complicity  in 
an  anarchist  outbreak  which  took  place  at  Lyons  in  1884.  But 
there  was  something  extraordinary  about  a  prisoner  who  could  get 
the  libraries  of  Ernest  Renan  and  the  Paris  Academy  of  Sciences 

*  "  I  returned  from  that  journey  with  very  definite  sociological  theories  in 
my  mind  which  I  have  ever  since  cherished,  and  I  have  done  everything  I  can 
to  give  them  a  more  clear  and  a  more  concrete  expression."  Kropotkin 's 
principal  works  are  :  Paroles  dun  Revolte  (1884) ;  In  Russian  and  French  Prisons 
(1887);  L*  Conqufte  du  Pain  (1888;  Engl.  trans.  1906);  The  State,  its  Part  in 
History  (1898);  Fields,  Factories,  andWorkshops(  1899);  Memoirs  of  a  Revolutionist 
(1900);  M  utual  Aid  (\W2).  He  has  also  published  a  large  number  of  pamphlets, 
among  them  U Anarchic:  sa  Philosophic,  ton  Ideal  (1896).  Our  quotations  are 
taken  from  EltzbacherVDer  Anarchismut,  a  work  that  consists  almost  entirely  of 
quotatioaa  from  the  various  anarchist  authors,  grouped  under  a  few  headings. 
[The  ref  3re*ioes  are  to  the  French  translation;  1902.— Tr]  These  writers,  and 
Kropotkin  among  them,  have  readily  recognised  the  impartiality  of  the  work. 


622  THE  ANARCHISTS 

placed  at  his  disposal  during  his  term  of  imprisonment  in  order  to 
enable  him  to  pursue  his  scientific  investigations.  During  his 
previous  imprisonment  in  Russia  the  Geographical  Society  of  St. 
Petersburg  had  extended  him  a  similar  privilege.  Kropotkin  has 
since  lived  in  England. 

The  best  known  French  anarchists,  Elisee  Reclus,  the  geographer, 
and  Jean  Grave,  simply  reproduce  Kropotkin's  ideas,  with  an 
occasional  admixture  of  Bakunin's  or  Proudhon's.1 

Our  concern  is  with  the  expression  of  anarchist  ideas  as  we  find 
them  in  the  best  known  writers  of  the  school.  Consequently  we 
must  pass  over  the  very  striking  but  immature  formulae  which  are 
not  infrequently  to  be  met  with  in  the  works  of  more  obscure 
writers.2 

Here  again  the  distinguishing  features  are  the  emphasis  laid  upon 
individual  rights  and  a  passion  for  the  free  and  full  development  of 
personality,  which,  as  we  have  seen,  was  the  keynote  of  Stirner's 
system.  "  Obedience  means  abdication,"  declares  Elisee  Reclus.3 
"  Mankind's  subjection  will  continue  just  so  long  as  it  is  tolerated. 
I  am  ashamed  of  my  fellow-men,"  writes  Proudhon  in  1850  from  his 
prison  at  Doullens.4  "  My  liberty,"  says  Bakunin,  "  or  what  comes  to 
the  same  thing,  my  honour  as  a  man,  consists  in  obeying  no  other 
individual  and  in  performing  only  just  those  acts  that  carry  convic- 
tion to  me."  *  Jean  Grave  declares  that  society  can  impose  '*  no 
limitations  upon  the  individual  save  such  as  are  derived  from  the 
natural  conditions  under  which  he  lives."  ' 

But  this  cult  of  the  individual  which  is  present  everywhere  in 
anarchist  literature  rests  upon  a  conception  which  is  the  direct 
antithesis  of  Stirner's.  To  Stirner  every  man  was  a  unique  being 
whose  will  was  his  only  law.  The  anarchists  who  follow  Proudhon, 
on  the  other  hand,  regard  man  as  a  specimen  of  humanity,  i.e.  of 

1  Cf.  L' Evolution,  la  Revolution,  et  Vldeal  anarchique,  by  filisee  Reclus 
(Paris,  1898),  and  La  Societi  future,  by  Jean  Grave  (1895). 

*  On  the  present  position  of  anarchist  ideas  in  France  see  R.  de  Marmande, 
Les  Forces  revolutionnaires  en  France,  in  the  Grande  Revue,  August  10,  1911. 

'  L'Svolution,  la  Revolution,  et  I'ldeal  anarchique,  p.  88  ;  and  he  adds  :  "  Our 
ideal  implies  the  fullest  and  most  absolute  liberty  of  expression  of  opinion  on 
all  matters  whatsoever.  It  further  involves  complete  freedom  to  follow  one's 
own  inclinations  or  to  do  as  one  likes  "  (p.  143),  with  this  single  proviso :  "  that 
the  individual  is  thereby  developing  a  healthy  moral  life  "  (p.  141 ). 

*•  Extract  from  Garnets,  published  in  the  Figaro,  January  16,  1909. 

6  (Euvres,  vol.  i,  p.  281. 

6  Jean  Grave,  La  Societe  future,  p.  157.  Cf.  also  p.  199  :  "  No  individual 
must  accept  any  restriction  that- will  check  his  development,  nor  must  he  submit 
to  the  yoke  of  authority  under  any  pretence  whatsoever." 


SOCIAL  AND  POLITICAL  ANARCHISM  623 

something  superior  to  the  individual.     "  What  I   respect  in  my 
neighbour  is  his  manhood," J   wrote  Proudhon.     It  is  this  humanity 
or  manhood  that  the  anarchist  would  have  us  respect  by  respecting 
his  liberty,  for,  as  Bakunin  declares,  •'  liberty  is  the  supreme  aim  of  all 
human  development."1     It  is  not  the  triumph  of  the  egoist  but  the 
triumph  of  humanity  in  the  individual  that  the  anarchists  would 
seek,  and  so  they  claim  liberty  not  merely  for  themselves  but  for 
all  men.     Far  from  wishing  to  be  served  by  their  fellow-men,  as 
Stirner  desired,  they  want  equal  respect  shown  for  human  dignity 
wherever  found.     "  Treat  others  as  you  would  that  others  should 
treat  you  under  similar  circumstances,"  8  writes  Kropotkin,  employ- 
ing Kantian  and  even  Christian  phraseology.     Bakunin,  a  faithful 
disciple  of  Proudhon's,  considered  that  "  all  morality  is  founded  on 
human  respect,  that  is  to  say,  upon  the  recognition  of  the  humanity,  of 
the  human  rights  and  worth  in  all  men,  of  whatever  race  or  colour, 
degree  of  intellectual  or  moral  development "  ;  *  and  he  adds  that  "  the 
individual  can  only  become  free  when  every  other  individual  is  free. 
Liberty  is  not  an  isolated  fact.     It  is  the  outcome  of  mutual  good- 
will ;  a  principle  not  of  exclusion,  but  of  inclusion,  the  liberty  of  each 
individual  being  simply  the  reflection  of  his  humanity  or  of   his 
rights  as  a  human  being  in  the  conscience  of  every  free  man,  his 
brother  and  equal."  *    This  idea  of  humanity,   which  the   latest 
anarchists  owe  to  Proudhon,  is  not  simply  foreign  to  Stirner,  but  is 
just  one  of  those  phantoms  which  Stirner  was  particularly  anxious 
to  waylay.* 

Along  with  this  extravagant  worship  of  individual  liberty  goes 
a  hatred  of  all  authority.  Here  the  political  anarchists  join  hands 
with  Stirner.  For  the  exercise  of  authority  of  one  man  over  another 
means  the  exploitation  of  one  man  by  another  and  a  denial  of  his 
humanity.  The  State  is  the  summation  of  all  authority,  and  the 
full  force  of  anarchist  hatred  is  focused  upon  the  State.  No  human 
relation  is  too  sacred  for  State  intervention,  no  citizen  but  is  liable 

1  Justice  dans  la  Rtvolitfion,  vol.  i,  p.  185. 

8  Bakunin,  (Euvrea,  vol.  i,  p.  105. 

1  Quoted  by  Eltzbacher,  foe.  cit.,  p.  199. 

*  Bakunin,  CSuvres,  vol.  i,  p.  281.     "  I  can  be  really  free  when  those  around 
me,  both  men  and  women,  are  also  free.    The  liberty  of  others,  far  from  limiting' 
or  negating  my  own,  is,  on  the  contrary,  ite  necessary  condition  and  guarantee." 

8  Ibid.,  vol.  i,  p.  277. 

•  The  idea  of  respecting  man's  humanity  is  vigorously  criticised  by  Stirner. 
Proudhon  is  expressly  mentioned  as  the  chief  representative  of  that  view.    The 
principle  was  also  regarded  with  some  favour  by  Feuerbach,  who  wanted  to 
substitute  emphasis  upon  the  human  in  man  for  the  stress  generally  laid  upon 
the  divine  in  his  nature. 


624  THE  ANARCHISTS 

to  have  his  conduct  minutely  prescribed  by  law.  There  are  officers 
to  apply  the  law,  armies  to  enforce  it,  lecturers  to  interpret  it,  priests 
to  inculcate  respect  for  it,  and  jurists  to  expound  it  and  to  justify 
everybody.  Thus  has  the  State  become  the  agent  par  excellence  of 
all  exploitation  and  oppression.1  It  is  the  one  adversary,  in  the 
opinion  of  every  anarchist — "  the  sum  total  of  all  that  negates  the 
liberty  of  its  members."  **  It  is  the  grave  where  every  trace  of 
individuality  is  sacrificed  and  buried."  Elsewhere,  "  it  is  a  flagrant 
negation  of  humanity."  *  Bakunin,  who  in  this  matter  as  well  as 
in  many  others  is  a  follower  of  Bastiat,  speaks  of  it  as  "  the  visible 
incarnation  of  infuriated  force."  That  is  enough  to  label  it  for  ever 
with  the  evil  things  of  life,  for  the  aim  of  humanity  is  liberty,  but 
force  is  "  a  permanent  negation  of  liberty."  3 

A  necessary  agent  of  oppression,  government  always  and  in- 
evitably becomes  the  agent  of  corruption.  It  contaminates  every- 
thing that  comes  into  contact  with  it,  and  the  first  to  show  signs 
of  such  contamination  are  its  own  representatives.  "  The  best  man, 
whoever  that  may  be,  whatever  degree  of  intelligence,  magnanimity, 
and  purity  of  heart  he  may  have,  is  unavoidably  corrupted  by  his 
trade.  The  person  who  enjoys  any  privilege,  whether  political  or 
economic,  is  intellectually  and  morally  a  depraved  character."  So 
Bakunin  thought,4  and  Elisee  Reclus  writes  in  a  similar  strain. 
"  Every  tree  in  nature  bears  its  own  peculiar  fruit,  and  government, 
whatever  be  the  form  it  take,  always  results  in  caprice  or  tyranny, 
in  misery,  villainy,  murder,  and  evil."  5  The  governing  classes  are 
inevitably  demoralised,  but  so  are  the  governed,  and  for  just  the 
same  reasons.  Government  is  a  worker  of  evil  even  when  it  would 
do  good,  for  "  the  good  whenever  it  is  enjoined  becomes  evil. 
Liberty,  morality,  real  human  dignity  consists  in  this,  that  man 
should  do  what  is  good  not  because  he  is  told  to  do  it,  but  simply 

1  Proudhon  is  the  model  here.     "  To  be  governed,"  says  he  (Idle  generale  de 
la  Revolution)  "  is  to  have  every  deed  of  ours,  every  action  and  movement, 
noted,  registered,  reviewed,  docketed,  measured,  filed,  assessed,  guaranteed, 
licensed,  authorised,  recommended,  prohibited,  checked,  reformed,  redressed, 
corrected  ;  under  pretence  of  public  policy,  to  be  taxed,  dragooned,  imprisoned, 
exploited,  cajoled,  forced,  cheated,  robbed  ;  at  the  least  sign  of  resistance  or 
complaint  to  be  repressed,  convicted,  vilified,  vexed,  hunted,  mauled,  murdered, 
stripped,  garrotted,  imprisoned,  shot,  slaughtered,  judged,  condemned,  deported, 
sacrificed,  sold,  betrayed,  and  finally  mocked,  flouted,  outraged  and  dishonoured 
That  is  government,  such  its  justification  and  morality." 

2  Bakunin,  (Euvres,  vol.  i,  pp.  143,  227,  151. 

*  Ibid,,  vol.  i,  p.  228. 

•  Ibid.,  vol.  i,  p.  176  ;  vol.  iii,  p.  53. 

1  IS  Evolution,  la  Revolution,  et  I' I  deal  anarchiste,  p.  164. 


SOCIAL  AND  POLITICAL  ANARCHISM  625 

because  he  thinks  that  it  really  is  the  best  that  he  can  ever  wish 
or  desire."  1 

It  matters  little  what  form  government  takes.  Absolute  or 
constitutional  monarchy,  democratic  or  aristocratic  republicanism, 
government  on  the  basis  of  a  universal  or  a  restricted  suffrage,  are 
all  much  the  same,  for  they  all  presuppose  a  State  of  some  sort. 
Authority,  whether  of  a  despot  or  of  the  majority  of  the  community, 
is  none  the  less  authority,  and  implies  the  exercise  of  a  will  other 
than  the  individual's  own.  The  great  error  committed  by  all  the 
revolutions  of  the  past  has  been  this  :  one  government  has  been 
turned  out,  but  only  to  have  its  place  usurped  by  another.  The  only 
true  revolution  will  be  that  which  will  get  rid  of  government  itself — 
the  fount  and  origin  of  all  authority. 

Still  closer  scrutiny  reveals  the  interesting  fact  that  the  State, 
which  is  naturally  oppressive,  gradually  becomes  employed  as  the 
instrument  for  the  subjugation  of  the  weak  by  the  strong,  the  poor 
by  the  rich.  It  was  Adam  Smith  who  ventured  to  declare  that 
"  civil  government  ...  is  in  reality  instituted  for  the  defence  of 
the  rich  against  the  poor,  or  of  those  who  have  some  property  against 
those  who  have  none  at  all."  a  Pages  of  anarchist  literature  simply 
consist  of  elaborate  paraphrases  of  this  remark  of  Smith's. 

Kropotkin  thinks  that  every  law  must  belong  to  one  or  other  of 
three  categories.  To  the  first  category  belong  all  laws  concerned 
with  the  security  of  the  individual ;  to  the  second  all  laws  con- 
cerned with  the  protection  of  government ;  and  to  the  third  all 
those  enactments  where  the  chief  object  in  view  is  the  inviolability 
of  private  property.3  In  the  opinion  of  the  anarchist,  all  laws  might 
more  correctly  be  placed  under  the  last  category  only,  for  when- 
ever the  safety  of  the  individual  is  in  any  way  threatened  it  is 
generally  the  result  of  some  inequality  of  fortune.4  Indirectly, 

1  Bakunin,  CSuvres,  vol.  i,  p.  280. 

*  Wealth  of  Nations,  vol.  ii,  p.  207.  Cf.  supra,  p.  79,  footnote.     Adam  Smith,  it 
is  true,  did  write  that  "  civil  government,  so  far  as  it  is  instituted  for  the  security  of 
property,"  etc. ;  but  that  does  not  imply  that  the  great  economist  regarded  this  as 
the  only  object  of  government,  although  it  certainly  is  one  of  its  chief  aims. 

*  "  The  million  and  one  laws  that  govern  humanity  naturally  fall  into  one 
or  other  of  three  categories  :  laws  for  the  protection  of  property,  of  government, 
or  of  individuals.     If  we  take  these  three  divisions  and  analyse  them  we  are 
inevitably  forced  to  realise  how  futile  and  even  injurious  all  legislation  is." 
(Memoirs  of  a  Revolutionist,  p.  236.) 

1  "  Society  itself  is  every  day  creating  beings  imbued  with  an ti -social  feelinga 
and  incapable  of  leading  honest,  industrious  lives."  (Kropotkin,  quoted  by 
Eltzbacher,  loc.  cil.,  p.  221.)  "  Seeing  that  the  organisation  of  society  is  alwayi 
and  everywhere  the  one  cause  of  all  the  crimes  committed  by  men,  ita  conduct 


626  THE  ANARCHISTS 

that  is  to  say,  the  attack  is  directed  against  property.  The  real 
function  of  government  is  to  defend  property,  and  every  law  which 
is  instrumental  in  protecting  property  is  also  effective  in  shielding 
the  institution  of  government  from  attack. 

Property  itself  is  an  organisation  which  enables  a  small  minority 
of  proprietors  to  exploit  and  to  hold  in  perpetual  slavery  the  masses 
of  the  people.  In  this  instance  the  anarchists  have  not  made  any 
weighty  contribution  of  their  own,  but  have  merely  adopted  the 
criticisms  of  the  socialists.1  Proceeding  in  the  usual  fashion,  they 
point  to  the  miserable  wages  which  are  usually  paid  to  the  workers, 
and  show  how  the  masters  always  manage  to  reserve  all  the  leisure, 
all  the  joys  of  existence,  all  the  culture  and  other  benefits  of  civilisa- 
tion for  themselves.  Private  property  is  of  the  essence  of  privilege — 
the  parent  of  every  other  kind  of  privilege.  And  the  State  becomes 
simply  the  bulwark  of  privilege.  "  Exploitation  and  government," 
says  Bakunin,  "  are  correlative  terms  indispensable  to  political  life 
of  every  kind.  Exploitation  supplies  the  means  as  well  as  the 
foundation  upon  which  government  is  raised,  and  the  aim  which  it 
follows,  which  is  merely  to  legalise  and  defend  further  exploitation."  * 

in  punishing  criminals  is  clearly  absurd  or  obviously  insincere.  Every  punish- 
ment implies  guilt,  but  the  criminals  in  this  case  are  never  guilty.  We  deny 
the  so-called  right  of  society  to  bestow  punishment  in  this  arbitrary  fashion. 
A  human  being  is  simply  the  unwilling  product  of  the  natural  or  social  environ- 
ment in  which  he  was  born  and  reared  and  under  whose  influence  he  still  remains. 
The  three  great  causes  of  human  immorality  are  inequality,  whether  political, 
economic,  or  social ;  ignorance,  which  is  its  natural  result ;  and  slavery,  its 
inevitable  consequence."  (Bakunin,  Programme  de  VAlliance  Internationale  de  la 
Dhnocratie  socialists,  in  Sozial-politischer  Briefwechsel,  pp.  332-333.) 

"  Property  and  want  are  the  great  incentives  to  crime.  But  if  defective 
society  organisation  is  the  cause  of  crime,  an  improvement  in  organisation  should 
cause  a  disappearance  of  crime."  (Jean  Grave,  La  Societe  future,  pp.  137-138.) 

1  "  la  it  necessary,"  asks  Bakunin,  "  to  repeat  the  arguments  of  socialism, 
which  are  still  unanswerable  and  which  no  bourgeois  economist  has  ever  attempted 
to  disprove  ?  What  are  we  to  make  of  property  and  capital  as  they  exist  at 
the  present  moment  ?  In  both  cases  it  practically  means  a  right  or  a  powei 
guaranteed  and  protected  by  society  to  live  without  working  ;  and  since  property 
and  capital  produce  absolutely  nothing  unless  fertilised  by  labour,  it  means 
power  and  the  right  to  live  upon  the  labour  of  others  and  to  exploit  the  labour 
of  those  who  have  neither  property  nor  capital  and  are  compelled  to  sell  their 
productive  force  to  the  fortunate  owner  of  the  one  or  other  of  these."  Of. 
Kropotkin's  Conquest  of  .Bread,  p.  56 :  "  Multiply  examples,  choose  them  where 
you  will,  consider  the  origin  of  all  fortunes,  large  or  small,  whether  arising  out 
of  commerce,  finance,  manufactures,  or  the  land.  Everywhere  you  will  find 
that  the  wealth  of  the  wealthy  springs  from  the  poverty  of  the  poor."  In  this 
sentence  he  sums  up  a  long  demonstration  which  he  gives  in  proof  of  thi* 
contention. 

*  Bakunin,  (Euvrei.  vol.  i,  p.  324, 


SOCIAL  AND  POLITICAL  ANARCHISM  627 

"Experience  teaches  us,"  says  Proudhon,1  "that  government 
everywhere,  however  popular  at  first,  has  always  been  on  the  side 
of  the  rich  and  the  educated  as  against  the  poor  and  ignorant 
masses."  2 

Whether  the  extinction  of  private  property,  which  would  free  the 
worker  from  the  danger  of  being  exploited  by  the  rich,  would  also 
render  the  State  unnecessary  is  a  question  upon  which  the  anarchists 
are  not  agreed.  Proudhon,  we  remember,  had  hoped  by  means  of 
the  Exchange  Bank  to  reduce  the  right  of  property  to  mere 
possession.  Bakunin,  on  the  contrary,  is  under  the  spell  of  the 
Marxians,  and,  like  a  true  collectivist,  he  thinks  that  all  the  instru- 
ments of  production,  including  land,  should  be  possessed  by  the 
community.  Such  instruments  should  always  be  at  the  disposal 
of  groups  of  working  men  expert  in  the  details  of  agriculture  or 
industrial  production,  and  such  workers  should  be  paid  according 
to  their  labour. 3  Kropotkin,  on  the  other  hand,  regards  communism 
as  the  ideal  and  looks  upon  the  distinction  drawn  by  the  collectivist 
between  instruments  of  production  and  objects  of  consumption  as 
utterly  futile.  Food,  clothing,  and  fuel  are  quite  as  necessary 
for  production  as  machinery  or  tools,  and  nothing  is  gained  by 
emphasising  the  distinction  between  them.  Social  resources  of  every 
kind  should  be  freely  placed  at  the  disposal  of  the  workers.* 

But  the  State  and  the  institution  of  private  property  by  no 
means  exhausts  the  list  of  tyrannies.  Individual  liberty  is  as  little 
compatible  with  irrevocable  vows — that  is,  with  a  present  promise 
which  binds  for  ever  the  will  of  man — as  it  is  with  submission  to 
external  authority.  The  present  marriage  law,  for  example,  violates 
both  these  conditions.  Marriage  ought  to  be  a  free  union.  A  contract 
freely  entered  upon  and  deliberately  fulfilled  is  the  only  form  of 
marriage  that  is  compatible  with  the  true  dignity  and  equality  of 
both  man  and  woman.6  A  free  and  not  a  legal  contract  is  the  only 
form  of  engagement  which  the  anarchists  recognise.  Free  contract 

1  I  die  ginlrale  de  la  Revolution,  p.  119. 

*  "  Law  is  simply  an  instrument  invented  for  the  maintenance  of  exploita- 
tion and  the  domination  of  the  idle  rich  over  the  toiling  masses.  Ite  sole  mission 
is  the  perpetuation  of  exploitation."  (Kropotkin,  Memoirs  of  a  Revolutionist, 

p.  235.) 

»  Bakunin,  Programme  deVAUiance,  in  Sozial-politiacher  Briefwechsel,  p.  339. 

1   Kropotkin,  Conquest  of  Bread,  pp.  61-62. 

»  "  The  anarchist*  want  to  see  free  unions  established,  resting  upon  mutual 
affection  and  based  upon  respect  for  one's  self  and  for  the  dignity  of  others. 
And  in  that  sense,  in  their  desire  to  show  respect  and  affection  for  all  the 
members  of  the  association,  they  are  inimical  to  the  family."  (filisee  Reclus, 
loc.  cit.,  pp.  146-146.) 


628  THE  ANARCHISTS 

between  man  and  wife,  between  an  individual  and  an  association, 
between  different  associations  pursuing  the  same  task,  between  one 
commune  and  another,  or  between  a  commune  and  a  whole  country. 
But  such  engagements  must  always  be  revocable,  otherwise  they 
would  merely  constitute  another  link  in  the  chain  that  has  shackled 
humanity.  Every  contract  that  is  not  voluntarily  and  frequently 
renewed  becomes  tyrannical  and  oppressive  and  constitutes  a  stand- 
ing menace  to  human  liberty.  "  Because  I  was  a  fool  yesterday, 
must  I  remain  one  all  my  life  ?  "  1  asks  Stirner ;  and  on  this  point 
Bakunin,  Kropotkin,  Reclus,  Jean  Grave,  and  even  Proudhon  are 
agreed. 

To  regard  their  social  philosophy  as  nothing  but  pure  caprice 
because  of  the  wonderful  faith  which  they  had  in  their  fellow-men 
would,  however,  be  a  great  mistake. 

Notwithstanding  the  merciless  criticism  of  authority  of  every 
kind,  there  was  still  left  one  autocrat,  of  a  purely  abstract  character 
perhaps,  but  none  the  less  imperious  in  its  demands.  This  was 
the  authority  of  reason  or  of  science.  The  sovereignty  of  reason  was 
one  of  the  essential  features  of  Proudhon's  anarchist  society.*  What 
Proudhon  calls  reason  Bakunin  refers  to  as  science,  but  his  obeisance 
is  not  a  whit  less  devotional.  "  We  recognise,"  says  he,  *'  the 
absolute  authority  of  science  and  the  futility  of  contending  with 
natural  law.  No  liberty  is  possible  for  man  unless  he  recognise 
this  and  seek  to  turn  this  law  to  his  own  advantage.  No  one  except 
a  fool  or  a  theologian,  or  perhaps  a  metaphysician,  a  jurist,  or  a 
bourgeois  economist,  would  revolt  against  the  mathematical  law 
which  declares  that  2-4-2  =  4."  The  utmost  that  a  man  can 
claim  in  this  matter  is  that  "  he  obeys  the  laws  of  nature  because  he 
himself  has  come  to  regard  them  as  necessary,  and  not  because  they 
have  been  imposed  upon  him  by  some  external  authority."  * 

Not  only  does  Bakunin  bow  the  knee  to  science,  but  he  also 
swears  allegiance  to  technical  or  scientific  skill.  "  In  the  matter  of 
boots  I  am  willing  to  accept  the  authority  of  the  shoemaker ;  of 
clothes,  the  opinion  of  the  tailor ;  if  it  is  a  house,  a  canal,  or  a  railway, 

1  Der  Einzige,  p.  229. 

*  Of.  Idee  generate  de  la  Revolution,  p.  281 ,  and  p.  342  :  "  Revolution  follows 
revelation.  Reason  aided  by  experience  reveals  to  us  the  nature  of  the  laws 
which  govern  society  as  well  as  nature,  and  which  in  both  cases  are  simply  the 
laws  of  necessity.  They  are  neither  made  by  man  nor  imposed  by  his  authority. 
They  have  only  been  discovered  step  by  step,  which  is  a  proof  of  their  independent 
existence.  By  obeying  them  a  man  becomes  just  and  noble.  Violation  of  them 
constitutes  injustice  and  sin.  I  can  suggest  no  other  motive  for  human  actions." 

1  Bakunin,  CSuvres,  vol.  iii,  p.  51. 


MUTUAL  AID 

I  consult  the  architect  and  the  engineer.  What  I  respect  is  not 
their  office  but  their  science,  not  the  man  but  his  knowledge.  I 
cannot,  however,  allow  any  one  of  them  to  impose  upon  me,  be  he 
shoemaker,  tailor,  architect,  or  savant.  I  listen  to  them  willingly 
and  with  all  the  respect  which  their  intelligence,  character,  or 
knowledge  deserves,  but  always  reserving  my  undisputed  right  of 
criticism  and  control."  l  Bakunin  has  no  doubt  that  most  men 
willingly  and  spontaneously  acknowledge  the  natural  authority  of 
science.  He  agrees  with  Descartes  and  employs  almost  identical 
terms  *  when  he  declares  that  "  common  sense  is  one  of  the  com- 
monest things  in  the  world."  But  common  sense  simply  means 
"  the  totality  of  the  generally  recognised  laws  of  nature."  He  shares 
with  the  Physiocrats  a  belief  in  their  obviousness,  and  invokes  their 
authority  whenever  he  makes  a  vow.  He  is  also  anxious  to  make 
them  known  and  acceptable  of  all  men  through  the  instrumentality 
of  a  general  system  of  popular  education.  The  moment  they  are 
accepted  by  "  the  universal  conscience  of  mankind  the  question  of 
liberty  will  be  completely  solved."  *  Let  us  again  note  how  redolent 
all  this  is  of  the  rationalistic  optimism  of  the  eighteenth  century, 
and  how  closely  Liberals  and  anarchists  resemble  one  another  in 
their  absolute  faith  in  the  "  sweet  reasonableness  "  of  mankind. 
Bakunin  only  differs  from  the  Physiocrats  in  his  hatred  of  the  despot 
whom  they  had  enthroned. 

A  society  of  free  men,  perfectly  autonomous,  each  obeying  only 
himself,  but  subservient  to  the  authority  of  reason  and  science — 
such  is  the  ideal  which  the  anarchists  propose,  a  preliminary  con- 
sideration of  its  realisation  being  the  overthrow  of  every  established 
authority.  "  No  God  and  no  master,"  says  Jean  Grave ;  "  everyone 
obeying  his  own  will."  * 


III :   MUTUAL  AID  AND  THE 

ANARCHIST  CONCEPTION  OF  SOCIETY 

AT  first  sight  it  might  seem  that  a  conception  of  social  existence 

which  would  raise  every  individual  on  a  pedestal  and  proclaim  the 

complete  autonomy  of  each  would  speedily  reduce  society  to  a 

number  of  independent  personalities.     Every  social  tie  removed, 

1  Bakunin,  QSuvret,  vol.  iii,  p.  66. 

2  "  In  general  we  may  say  that  man's  general  life  is  almost  entirely  governed 
by  what  we  call  good  sense."     (Ibid.,  vol  iii,  p.  60.) 

»  fbid.,  vol.  iii,  p.  61. 

future,  p.  303. 


630  THE  ANARCHISTS 

there  would  remain  just  a  few  individuals  in  juxtaposition,  and 
society  as  a  "  collective  being  "  would  disappear. 

But  it  would  be  a  grievous  mistake  to  conceive  of  the  anarchist 
ideal  in  this  light.  There  is  no  social  doctrine  where  the  words 
"  solidarity  "  and  "  fraternity  "  more  frequently  recur.  Individual 
happiness  and  social  well-being  are  to  them  inseparable.  Hobbes' 
society,  or  Stirner's,  where  the  hand  of  everyone  is  against  his 
brother,  fill  the  anarchists  with  horror.  To  their  mind  that  is  a 
faithful  picture  of  society  as  it  exists  to-day.  In  reality,  how- 
ever, man  is  a  social  being.  The  individual  and  society  are 
correlative :  it  is  impossible  to  imagine  the  one  without  thinking  of 
the  other. 

No  one  has  given  more  forcible  expression  to  this  truth  than 
Bakunin ;  and  this  is  possibly  because  no  one  ever  had  a  keener 
sense  of  social  solidarity.  **  Let  us  do  justice  once  for  all,"  he  remarks, 
**  to  the  isolated  or  absolute  individual  of  the  idealists.  But  that 
individual  is  as  much  a  fiction  as  that  other  Absolute — God.  .  .  . 
Society,  however,  is  prior  to  the  individual,  and  will  doubtless  survive 
him,  just  as  Nature  will.  Society,  like  Nature,  is  eternal ;  born  of 
the  womb  of  Nature,  it  will  last  as  long  as  Nature  herself.  .  .  . 
Man  becomes  human  and  develops  a  conscience  only  when  he  realises 
his  humanity  in  society  ;  and  even  then  he  can  only  express  himself 
through  the  collective  action  of  society.  Man  can  only  be  freed 
from  the  yoke  of  external  nature  through  the  collective  or  social 
effort  of  his  fellow-men,  who  during  their  sojourn  here  have  trans- 
formed the  surface  of  the  earth  and  made  the  further  development 
of  mankind  possible.  But  freedom  from  the  yoke  of  his  own  nature, 
from  the  tyranny  of  his  own  instincts,  is  only  possible  when  the 
bodily  senses  are  controlled  by  a  well-trained,  well-educated  mind. 
Education  and  training  are  essentially  social  functions.  Outside  the 
bounds  of  society,  man  would  for  ever  remain  a  savage  beast." l 

Whether  we  read  Proudhon  or  Kropotkin,  we  always  meet  with 
the  same  emphasis  on  the  reality  of  the  social  being,  on  the  pre- 
existence  of  the  State,  or  at  least  of  its  necessary  coexistence,  if  the 
individual  is  ever  to  reach  full  development.  It  is  true  that  there 
are  a  few  anarchists,  such  as  Jean  Grave,  who  still  seem  to  uphold 
the  old  futile  distinction  between  the  individual  and  society,  and 
who  conceive  of  society  as  made  up  of  individuals  just  as  a  house  is 
built  of  bricks. 

But  is  there  no  element  of  contradiction  between  this  idea 
and  the  previous  declaration  of  individual  autonomy  ?  How  is  it 
1  Bakunin,  (Euvre*.  vol.  i,  pp.  286,  298,  277, 


MUTUAL  AID  631 

possible  to  exalt  social  life  and  at  the  same  time  demand  the  abolition 
of  all  traditional  social  links  ?  J 

The  apparent  antinomy  is  resolved  by  emphasising  a  distinction 
which  Liberalism  had  drawn  between  government  and  society. 
Society  is  the  natural,  spontaneous  expression  of  social  life.  Govern- 
ment is  an  artificial  organ,  or,  to  change  the  metaphor,  a  parasite 
preying  upon  society.*  Liberals  from  the  days  of  Smith  onward 
had  applied  the  distinction  to  economic  institutions ;  the  anarchists 

1  Bakunin  on  his  death-bed  confessed  to  his  friend  Reichel  that  "  all  his 
philosophy  had  been  built  upon  a  false  foundation.  All  was  vitiated  because 
he  had  begun  by  taking  man  as  an  individual,  whereas  he  is  really  a  member 
of  a  collective  whole  "  (quoted  by  Guillaume,  CEuvres,  preface  to  vol.  ii,  p.  60). 
In  his  Philosophic  du  Progres  ((Euvrca,  vol.  xx,  pp.  36-38)  Proudhon  writes  as 
follows :  "  All  that  reason  knows  and  maintains  is  that  the  individual,  like  an 
idea,  is  really  a  group.  All  existence  is  in  groups,  and  whatever  forms  a  group 
also  forms  a  unit,  and  consequently  becomes  perceptible  and  is  then  said  to 
exist.  In  accordance  with  this  general  conception  of  being,  I  think  it  possible 
to  prove  the  existence  of  positive  reality  and  up  to  a  certain  point  to  demonstrate 
the  laws  of  the  social  being  or  of  the  humanitarian  group,  and  to  establish  a 
proof  of  the  existence  of  an  individuality  superior  to  collective  man  and  still 
quite  other  and  different  from  his  individual  self."  The  same  idea  frequently 
comes  up  in  different  connections,  e.g.,  in  the  Petit  Catechi#me  politique  at 
the  end  of  vol.  i  of  La  Justice  dana  la  RivobUion,  and  in  Idee  generate  de  la 
Rivolution. 

Kropotkin  thinks  that  man  has  always  lived  in  society  of  one  kind  or  another. 
"  As  far  back  as  we  can  go  in  the  palaeo-ethnology  of  mankind,  we  find  men 
living  in  societies,  in  tribes  similar  to  those  of  the  highest  mammals."  (Mutual 
Aid,  p.  80).  "  Man  did  not  create  society  ;  society  is  older  than  man."  (The 
State,  its  Historic  R6le,  p.  6;  London,  1898.)  Jean  Grave,  on  the  other  hand, 
thinks  that  "  the  individual  was  prior  to  society.  Destroy  the  individual,  and 
there  will  be  nothing  left  of  society.  Let  the  association  be  dissolved  and  the 
individuals  scattered,  they  will  fare  badly  and  will  possibly  return  to  savagery, 
their  faculties  will  decay  and  not  progress,  but  still  they  will  continue  to  exist." 
(La  Societe  future,  pp.  160-162.)  Grave's  view  is  essentially  his  own  and  does  not 
square  with  those  of  either  Kropotkin,  Bakunin,  or  Proudhon,  the  real  founders  of 
anarchy.  It  is,  moreover,  quite  obvious  that  their  theories  are  really  much 
nearer  the  truth,  for  it  is  as  impossible  to  conceive  of  society  without  the  indi- 
vidual as  it  is  to  conceive  of  the  individual  without  society.  The  individual,  as 
Bakunin  emphatically  declares,  is  a  fiction,  or  an  abstraction,  as  Walras  would 
say.  Many  people  find  it  difficult  to  accept  this  doctrine.  But  it  seems  the  only 
one  that  tallies  with  the  facts,  whether  of  nature  or  of  history.  We  can  no  more 
imagine  the  individual  without  society  than  we  can  a  fish  without  water. 
Deprived  of  water,  it  is  not  only  less  of  a  fish,  but  it  is  no  longer  a  fish  at  all— 
except  a  dead  one. 

1  Bastiat  speaks  of  this  error  of  confusing  government  and  society  as  being 
the  worst  that  has  ever  befallen  the  science.  The  State  problem  he  defines 
as  follows  :  "  How  to  inscribe  within  the  great  circle  which  we  call  society  that 
other  circle  called  government."  Dunoyer  in  so  many  words  expresses  the  eame 
idea. 


632  THE  ANARCHISTS 

were  to  apply  it  to  every  social  institution.  Not  only  the  economic 
but  every  form  of  social  life  is  the  outcome  of  the  social  instinct 
which  lies  deep  in  the  nature  of  humanity.  This  instinct  of  solidarity 
urges  men  to  seek  the  help  of  their  fellow-men  and  to  act  in  concert 
with  them.  It  is  what  Kropotkin  calls  mutual  aid,  and  seems  as 
natural  to  man  and  as  necessary  for  the  preservation  of  the  species 
as  the  struggle  for  existence  itself.  What  really  binds  society 
together,  what  makes  for  real  cohesion,  is  not  constraint  (which, 
contrary  to  the  time-honoured  belief  of  the  privileged  classes,  is  really 
only  necessary  to  uphold  their  privileges),  but  this  profound  instinct 
of  mutual  help  and  reciprocal  friendship,  whose  strength  and  force 
have  never  yet  been  adequately  realised.  "  There  is  in  human 
nature,"  says  Kropotkin,  **  a  nucleus  of  social  habits  inherited  from 
the  past,  which  have  not  been  as  fully  appreciated  as  they  might.  They 
are  not  the  result  of  any  restraint  and  transcend  all  compulsion."  * 
Law,  instead  of  creating  the  social  instinct,  simply  presupposes 
it.  Laws  can  only  be  applied  so  long  as  the  instinct  exists,  and 
fall  into  desuetude  as  soon  as  the  instinct  refuses  to  sanction  them. 
Government,  far  from  developing  this  instinct,  opposes  it  with  rigid, 
stereotyped  institutions  which  thwart  its  full  and  complete  develop- 
ment. To  free  the  individual  from  external  restraint  is  also  to 
liberate  society  by  giving  it  greater  plasticity  and  permitting  it  to 
assume  new  forms  which  are  obviously  better  adapted  to  the  happi- 
ness and  prosperity  of  the  race.1  Kropotkin  in  his  delightful  book 
Mutual  Aid  gives  numerous  examples  of  this  spontaneous  social 
instinct.  He  shows  how  it  assumes  different  forms  in  the  economic, 
scientific,  educational,  sporting,  hygienic,  and  charitable  associa- 
tions of  modern  Europe ;  in  the  municipalities  and  corporations  of 

1  Memoirs  of  a  Revolutionist,  p.  414.    Cf.  also  Paroles  (Tune,  RevoUe,  p.  221. 

*  This  idea  finds  frequent  expression  both  with  Reclus  and  Kropotkin. 
"  The  fact  that  we  have  instituted,  regulated,  codified,  and  encompassed  with 
constraints  and  penalties,  with  gendarmes  and  jailers,  the  larger  part  of  our  more 
or  less  incoherent  collection  of  political,  religious,  moral  and  social  conceptions 
of  to-day  in  order  to  enforce  them  upon  the  citizens  of  to-morrow  is  in  itself 
sufficiently  absurd,  and  it  is  bound  to  have  contradictory  results.  Life,  which  is 
always  improving  and  renewing  itself,  can  never  submit  to  regulations  which  have 
been  drawn  up  in  some  period  now  past."  (Reclus,  loc.  tit.,  pp.  108-9.)  "Anarchist 
society,"  writes  Kropotkin,  "  is  one  to  which  any  pre-eetablished,  crystallised 
form  of  law  will  always  be  repugnant.  It  is  also  one  which  looks  for  harmony, 
which  can  only  be  temporary  and  fugitive  perhaps,  in  the  equilibrium  between 
the  mass  of  different  forces  and  influences  of  every  kind  which  pursue  their 
course  without  the  slightest  deflection,  and  which  because  they  are  quite 
untrammelled  beget  reaction  and  arouse  those  activities  which  are  favourable 
to  them  when  they  move  in  the  direction  of  progress."  (L'Anarchit,  pp.  17, 18.) 


MUTUAL  AID  688 

the  Middle  Ages ;  and  how  even  among  animals  this  same  instinct; 
which  forms  the  real  basis  of  all  human  societies,  has  enabled  them 
to  overcome  the  natural  dangers  that  threaten  their  existence. 

Anarchist  society  must  not  be  conceived  as  a  bellum  omnium 
contra  omnes,  but  as  a  federation  of  free  associations  which  everyone 
would  be  at  liberty  to  enter  and  to  leave  just  as  he  liked.  This 
society,  Kropotkin  tells  us,  would  be  composed  of  a  multitude  of 
associations  bound  together  for  all  purposes  that  demand  united 
action.  A  federation  of  producers  would  have  control  of  agricultural 
and  industrial,  and  even  of  intellectual  and  artistic,  production  ;  an 
association  of  consumers  would  see  to  questions  of  housing,  lighting, 
health,  food,  and  sanitation.  In  some  cases  the  federation  of  pro- 
ducers would  join  hands  with  the  consumers'  league.  Still  wider 
groups  would  embrace  a  whole  country,  or  possibly  several  countries, 
and  would  include  people  employed  in  the  same  kind  of  work, 
whether  industrial,  intellectual,  or  artistic,  for  none  of  these  pursuits 
would  be  confined  to  some  one  territory.  Mutual  understanding 
would  result  in  combined  efforts,  and  complete  liberty  would  give 
plenty  of  scope  for  invention  and  new  methods  of  organisation. 
Individual  initiative  would  be  encouraged ;  every  tendency  to 
uniformity  and  centralisation  would  be  effectively  checked.1 

In  such  a  society  as  this  complete  concord  between  the  general 
and  the  individual  interests,  hitherto  so  vainly  sought  after  by  the 
bourgeoisie,  would  be  realised  once  for  all  in  the  absolute  freedom 
now  the  possession  of  both  the  individual  and  the  group,  and 
in  the  total  disappearance  of  all  traces  of  antagonism  between 
possessors  and  non-possessing,  between  governors  and  governed. 
Again  we  note  a  revival  of  the  belief  in  the  spontaneous  harmony  of 
interests  which  was  so  prominent  a  feature  of  eighteenth-century 
philosophy.* 

1  Memoir*  of  a  Revolutionist. 

*  Proudhon  had  already  set  the  problem  ae  follows :  "  Can  we  find  a  method 
of  transacting  business  that  will  unite  divergent  interests  and  identify  individuals 
with  the  general  well-being,  replace  the  inequality  of  nature  by  equality  of 
education,  and  remove  all  political  and  economic  contradictions ;  when  eaoh 
individual  will  be  at  once  both  producer  and  consumer,  citizen  and  sovereign, 
ruler  and  ruled  ;  when  liberty  will  always  expand  without  involving  any 
counter-loss ;  when  the  well-being  of  eaoh  will  grow  indefinitely  without 
involving  any  damage  to  the  property,  the  labour,  or  the  revenue  of  any  of  his 
fellow-citizens,  or  of  the  State  itself,  without  weakening  the  interest*  he  has  in 
common  with  his  fellow-men,  without  alienating  their  good  opinion  or  destroying 
their  affection  for  him?"  (Idit  gtnerdU,  p.  145.)  Says  Jean  Grave:  "W«re 
society  established  on  natural  bases,  individual  and  general  interest*  would 
never  conflict."  (Socitif  future,  p.  156.) 

K.D.  * 


634  THE  ANARCHISTS 

Such  an  attractive  picture  of  society  was  bound  to  invite  criticism. 
The  anarchists  foresaw  this,  and  have  tried  to  meet  most  of  the 
arguments. 

In  the  first  place,  would  such  extravagant  freedom  not  beget 
abuse,  unjustifiable  repudiation  of  contracts,  crimes  and  misde- 
meanours ?  Would  it  not  give  rise  to  chronic  instability  ?  and  would 
the  conscientious  never  find  themselves  the  victims  of  the  fickle  and 
the  fraudulent  ? 

The  anarchists  agree  that  there  may  be  a  few  pranks  played,  or, 
as  Grave  euphemistically  calls  them,  "  certain  acts  apparently 
altogether  devoid  of  logic."  1  But  can  we  not  reckon  upon  criticism 
and  disapproval  checking  such  anti-social  instincts  ?  Public  opinion, 
if  it  were  once  freed  from  the  warping  influence  of  present-day 
institutions,  would  possess  far  greater  coercive  force.2  Our  present 
system  of  building  prisons,  "  those  criminal  universities,"  as 
Kropotkin  calls  them,  will  never  check  these  anti-social  instincts. 
**  Liberty  is  still  the  best  remedy  for  the  temporary  excesses  of 
liberty."  3  Moreover,  such  a  system  would  enjoy  a  superior  sanction 
in  the  possible  refusal  of  other  people  to  work  with  those  who  could 
not  keep  their  word.4  "  You  are  a  man  and  you  have  a  right  to 
live.  But  as  you  wish  to  live  under  special  conditions  and  leave  the 
ranks,  it  is  more  than  probable  that  you  will  suffer  for  it  in  your  daily 
relations  with  other  citizens."  5 

But  there  is  still  a  more  serious  objection.  Were  there  no  com- 
pulsion, would  anyone  be  found  willing  to  work  ?  The  host  of 
idlers  is  at  the  present  time  vast,  and  without  the  sting  of  necessity 

1  La  Societe  future,  p.  16.  "  We  cannot  disguise  the  fact,"  says  Kropotkin, 
"  that  if  complete  liberty  of  thought  and  action  were  once  given  to  the  individual 
we  should  see  some  exaggerations,  possibly  extravagant  exaggerations,  of  our 
principles."  (Memoirs  of  a  Revolutionist,  p.  413.) 

*  "The  only  great  and  all-powerful  authority  at  once  rational  and  natural 
that  we  can  respect  is  the  public  spirit  of  a  collective  society  founded  upon 
equality  and  solidarity,  upon  liberty  and  respect  for  the  human  qualities  of 
all  its  members.     It  will  be  a  thousand  times  more  powerful  than  all  your 
authorities,  whether  divine,  theological,  metaphysical,  political,  or  juridical, 
whether  instituted  by  Church  or  by  State  ;  more  powerful  than  all  your  criminal 
codes,  all  your  jailers  and  hangmen."     (Bakunin,  (Euvres,  vol.  iii,  p.  79.) 

'  Memoirs  of  a  Revolutionist,  p.  414.  This  is  also  one  of  the  favourite 
doctrines  of  the  Liberals. 

*  Kropotkin,  Conquest  of  Bread,  p.  206. 

*  Grave,  op.  cit.,  p.  297.     Proudhon  is  even  more  severe.     "  By  making  a 
contract  you   become  a  member  of  the  fraternity  of  free  men.     In  case  of 
infringement,  either  on  their  side  or  on  yours,  you  are  responsible  to  one  another, 
and  the  responsibility  might  even  involve  excommunication  and  death."  (Idit 
gkntnU,  p.  843.) 


MUTUAL  AID  685 

it  would  become  still  greater.  Kropotkin  remarks  that  **it  is 
only  about  the  sugar  plantations  of  the  West  Indies  and  the 
sugar  refineries  of  Europe  that  robbery,  laziness,  and  very  often 
drunkenness  become  quite  usual  with  the  bees.**  *  Is  it  not  possible 
that  men  are  just  imitating  the  bee  ? 

The  anarchists  point  out  that  many  a  so-called  idler  to-day  is 
simply  a  madcap  who  will  soon  discover  his  true  vocation  in  the  free 
society  of  the  future,  and  will  thus  be  gradually  transformed  into 
a  useful  member  of  society.8  Moreover,  does  not  the  fact  that  so 
many  people  shun  work  altogether  prove  that  the  present  method 
of  organising  society  must  be  at  once  cruel  and  repugnant  ?  The 
certainty  of  being  confined  in  an  unhealthy  workshop  for  ten  or 
twelve  hours  every  day,  with  mind  and  body  **  to  some  unmeaning 
task-work  given,"  in  return  for  a  wage  that  is  seldom  sufficient  to 
keep  a  family  in  decent  comfort,  is  hardly  a  prospect  that  is  likely 
to  attract  the  worker.  One  of  the  principal  aims  of  the  anarchist 
regime — and  in  this  respect  it  resembles  the  Phalanst£re  of  Fourier — 
will  be  to  make  labour  both  attractive  and  productive.*  Science 
will  render  the  factory  healthy  well  lighted  and  thoroughly  venti- 
lated. Machinery  will  even  come  to  the  rescue  of  the  housewife  and 
will  relieve  her  of  many  a  disagreeable  task.  Inventors,  who  are 
generally  ignorant  of  the  unpleasant  nature  of  many  of  these  tasks, 
have  been  inclined  to  ignore  them  altogether.  "  If  a  Huxley  spent 
only  five  hours  in  the  sewers  of  London,  rest  assured  that  he  would 
have  found  the  means  of  making  them  as  sanitary  as  his  physio- 
logical laboratory."  *  Finally,  and  most  important  of  all,  the 
working  day  could  then  be  reduced  to  a  matter  of  four  or  five 
hours,  for  there  would  no  longer  be  any  idlers,  and  the  systematic 
application  of  science  would  increase  production  tenfold. 

The  wonderful  expansion  of  production  under  the  influence  of 
applied  science  is  a  favourite  theme  of  the  anarchists.  Kropotkin 
has  treated  us  to  some  delightful  illustrations  of  this  in  his  Conquest 

1  Kropotkin,  Mutual  Aid,  p.  17. 

1  "  In  our  opinion,  and  speaking  strictly,  there  fa  no  such  thing  as  a  really 
idle  person.  There  are  a  few  individuals,  perhaps,  who  have  not  developed  as 
they  might  have  done  and  whose  activity  has  never  found'a  proper  outlet  under 
existing  conditions.  In  a  society  where  everyone  would  be  allowed  to  chooae 
his  own  sphere  of  work  the  idlest  people  would  be  found  doing  something." 
(J.  Grave,  La  Societe  future,  pp.  277-278.)  Kropotkin  writes  in  the  same  strain 
(Conquest  of  Bread,  chapter  on  Objection*). 

1  Kropotkin,  Memoirs  of  a  Revolutionist,  p.  414 ;  Conquest  of  Bread,  p,  168. 
The  anarchists  show  no  desire  to  expand  the  Phalanstere,  but  prefer  the  family 
life. 

«  Conquest  of  Bread,  p.  204. 


636  THE  ANARCHISTS 

of  Bread.  He  begins  by  pointing  out  the  wonders  already  accom- 
plished by  market  gardeners  living  in  the  neighbourhood  of  Paris. 
One  of  these,  employing  only  three  men  working  twelve  to  fifteen 
hours  a  day,  was  able,  thanks  to  intensive  cultivation,  to  raise  110 
tons  of  vegetables  on  one  acre  of  ground.  Taking  this  as  his  basis, 
he  calculates  that  the  3,600,000  inhabitants  in  the  departments  of  the 
Seine  and  the  Seine-et-Oise  could  produce  all  the  corn,  milk,  vegetables, 
and  fruit  which  they  could  possibly  need  in  the  year  with  fifty-eight 
half-days  labour  per  man.  By  parity  of  reasoning  he  arrives  at  the 
conclusion  that  twenty-eight  to  thirty-six  days'  work  per  annum 
would  secure  for  each  family  a  healthy,  comfortable  home  such  as  is 
occupied  by  English  working  men  at  the  present  time.  The  same 
thing  applies  to  clothing.  American  factories  produce  on  an  average 
forty  yards  of  cotton  in  ten  hours.  "  Admitting  that  a  family  needs 
two  hundred  yards  a  year  at  most,  this  would  be  equivalent  to  fifty 
hours'  labour,  or  ten  half-days  of  five  hours  each,1  and  that  all 
adults  save  women  bind  themselves  to  work  five  hours  a  day 
from  the  age  of  twenty  or  twenty-two  to  forty-five  or  fifty.  .  .  . 
Such  a  society  could  in  return  guarantee  well-being  to  all  its 
members."  2  Elisee  Reclus  shares  these  hopes.  It  seems  to  him 
that  "  in  the  great  human  family  hunger  is  simply  the  result  of  a 
collective  crime,  and  it  becomes  an  absurdity  when  we  remember 
that  the  products  are  more  than  double  enough  for  all  the  needs  of 
consumers."  3 

Amid  such  superabundant  wealth,  in  a  world  thus  transformed 
into  a  land  of  milk  and  honey,  distribution  would  not  be  a  very 
difficult  problem.  Nothing  really  could  be  easier.  "  No  stint  or 
limit  to  what  the  community  possesses  in  abundance,  but  equal 
sharing  and  dividing  of  those  commodities  which  are  scarce  or  apt 
to  run  short."  *  Such  was  to  be  the  guiding  principle.  In  practice 
the  women  and  children,  the  aged  and  the  infirm,  were  to  come  first 
and  the  robust  men  last,  for  such  even  is  the  etiquette  of  the  soup 
kitchen,  which  has  become  a  feature  of  some  recent  strikes.  As  to  the 
laws  of  value  which  are  supposed  to  determine  the  present  distribution 
of  wealth,  and  which  the  economists  fondly  believe  to  be  necessary  and 
immutable,  the  anarchists  regard  them  as  being  no  concern  of  theirs. 
The  futility  of  such  doctrines  is  a  source  of  some  amusement  to  them.6 

1  Conquest  of  Bread,  p.  130.  »  Ibid.,  p.  133. 

1  filisee  Reclus,  V Evolution,  etc.,  pp.  136-137.        *  Conquest  of  Bread,  p.  83. 

6  Cf.  Grave,  La  Societe  future,  ch.  14,  La  Valeur.  The  anarchists  frequently 
complain  that  their  ideas  are  generally  mutilated  by  the  economists.  To  read 
this  chapter  is  to  realise  the  amount  of  intelligence  which  they  display  when 
interpreting  their  adversaries'  doctrines  ! 


REVOLUTION  637 

IV:  REVOLUTION 

BUT  how  is  the  beautiful  dream  to  be  realised  ?  The  way  thither, 
from  the  miserable  wilderness  wherein  we  now  dwell  to  the  Promised 
Land  of  which  they  have  given  us  a  glimpse,  lies  through  Revolu- 
tion— so  the  anarchist  tells  us. 

A  theory  of  revolution  forms  a  necessary  part  of  the  anarchist 
doctrine.  In  the  mind  of  the  public  it  is  too  often  thought  to  be 
the  only  message  which  the  anarchists  have  to  give.  We  must  content 
ourselves  with  a  very  brief  reference  to  it,  for  the  non-economic  ideas 
of  anarchism  have  already  detained  us  sufficiently  long. 

Proudhon  is  soon  out  of  the  running.  We  have  already  had 
occasion  to  refer  to  his  disapproval  of  violence  and  revolution.  It 
seemed  to  him  that  the  anarchic  ideal  was  for  ever  impossible  apart 
from  a  change  of  heart  and  a  reawakening  of  conscience.  But  his 
successors  were  somewhat  less  patient.  To  their  minds  revolution 
seemed  an  unavoidable  necessity  from  which  escape  was  impossible. 
Even  if  we  could  imagine  all  the  privileged  individuals  of  to-day 
agreeing  among  themselves  on  the  night  of  some  fourth  of  August 
to  yield  up  every  privilege  which  they  possess  and  to  enter  the  ranks 
of  the  proletariat  of  their  own  free  will,  such  a  deed  would  hardly  be 
desirable.  The  people,  says  Reclus,  with  their  usual  generosity, 
would  simply  let  them  do  as  they  liked,  but  would  say  to  their 
former  masters,  "  Keep  your  privileges."  "  It  is  not  because 
justice  should  not  be  done,  but  things  ought  to  find  a  natural 
equilibrium.  The  oppressed  should  rise  in  their  own  strength,  the 
despoiled  seize  their  own  again,  and  the  slaves  regain  their  own 
liberty.  Such  things  can  only  really  be  attained  as  the  result  of  a 
bitter  struggle."  l 

It  is  not  that  Bakunin,  Kropotkin,  or  their  disciples  revel  in 
bloodshed  or  welcome  outbreaks  of  violence.  Bloodshed,  although 
inevitably  and  inseparably  connected  with  revolution,  is  none  the 
less  regrettable,  and  should  always  be  confined  within  the  narrowest 
limits.  "  Bloody  revolutions  are  occasionally  necessary  because  of 
the  crass  stupidity  of  mankind ;  but  they  are  always  an  evil,  an 
immense  evil,  and  a  great  misfortune ;  not  only  because  of  their 
victims,  but  also  because  of  the  pure  and  perfect  character  of  the 

1  L'Svolution,  p.  154.  Kropotkin  says :  "  Those  who  wish  the  triumph  of 
justice,  who  really  want  to  put  the  new  ideas  into  practice,  understand  the 
necessity  for  a  terrible  revolution  which  would  sweep  away  this  canker  and 
revive  the  degenerate  hearts  with  its  invigorating  rush,  bringing  back  habits  of 
devotion,  of  self-negation,  and  of  heroism,  without  which  society  become*  vile, 
degraded,  and  rotten."  (Parole*  d'un  Rtvolti,  p.  280.) 


638  THE  ANABCHISTS 

aims  in  view  of  which  they  are  carried  out."  l  "  The  question," 
says  Kropotkin,*  "  is  not  how  to  avoid  revolutions,  but  how  to  secure 
the  best  results  by  checking  civil  war  as  far  as  possible,  by  reducing 
the  number  of  victims,  and  by  restraining  the  more  dangerous 
passions."  To  do  this  we  must  rely  upon  people's  instincts,  who, 
far  from  being  sanguinary,  '*  are  really  too  kind  at  heart  not  to  be 
very  soon  disgusted  with  cruelty."  8  The  attack  must  be  directed 
not  against  men  but  against  their  position,  and  the  aim  must  be  not 
individuals  but  their  status.  Hence  Bakunin  lays  great  stress  upon 
setting  fire  to  the  national  archives,  and  to  papers  of  all  kinds 
relating  to  title  in  property,  upon  the  immediate  suppression  of 
all  law  courts  and  police,  upon  the  disbanding  of  the  army,  and 
the  instant  confiscation  of  all  instruments  of  production — factories, 
mines,  etc.  Kropotkin  in  the  Conquest  of  Bread  gives  us  a  picture 
of  an  insurgent  commune  laying  hold  of  houses  and  occupying  them, 
seizing  drapers'  establishments  and  taking  whatever  they  need, 
confiscating  the  land,  cultivating  it,  and  distributing  its  products. 
If  revolutionists  only  proceeded  in  this  fashion,  never  respecting  the 
rights  of  property  at  all  (which  was  the  great  mistake  made  by  the 
Commune  in  its  dealing  with  the  Bank  of  France  during  the  rising 
of  1871),  the  revolution  would  soon  be  over  and  society  would 
speedily  reorganise  itself  on  a  new  and  indestructible  basis  and  with 
a  minimum  of  bloodshed. 

But  the  tone  is  not  always  equally  pacific.  Bakunin  during  at 
least  one  period  of  his  life  preached  a  savage  and  merciless  revolu- 
tion against  privilege  of  every  kind.  At  that  time,  indeed,  he  might 
justly  have  passed  as  the  inventor  of  the  active  propaganda  which, 
strenuously  pursued  for  many  years  by  a  few  exasperated  fanatics, 
had  the  effect  of  rousing  public  opinion  everywhere  against  anarchism. 
"We  understand  revolution,"  someone  has  remarked,  "in  the  sense 
of  an  upheaval  of  what  we  call  the  worst  passions,  and  we  can 
imagine  its  resulting  in  the  destruction  of  what  we  to-day  term 
public  order."  "Brigandage,"  it  is  remarked  elsewhere,  "is  an 
honourable  method  of  political  propaganda  in  Russia,  where  the 
brigand  is  a  hero,  a  defender  and  saviour  of  the  people."4  In  a 

1  Bakunin,  in  Sozial-politischer,  p.  297. 

z  Memoirs  of  a  Revolutionist,  p.  297. 

1  Kropotkin,  quoted  by  Eltzbacher,  p.  236.  "  Revolution,  once  it  becomes 
socialistic,  will  cease  to  be  sanguinary  and  cruel.  The  people  are  not  cruel.  It  is 
the  privileged  classes  that  are  cruel.  People  are  ordinarily  kind  and  humane,  and 
will  suffer  long  rather  than  cause  others  any  suffering."  (Bakunin,  CEuvres,  vol. 
ill,  pp.  184-185.)  The  same  idea  runs  through  Sorel  s  Reflexions  tur  la  Violence, 

*  Bakuuinu  Sorial-poliiincher,  pp.  335  and  353. 


REVOLUTION  639 

kind  of  proclamation  entitled  The  Principles  of  Revolution,  which, 
as  some  writers  point  out,  ought  not  to  be  attributed  to  Bakunin, 
but  which  at  any  rate  appears  to  give  a  fair  representation  of  his 
ideas  at  this  period  of  his  life,  we  meet  with  the  following  words ; 
"  The  present  generation  should  blindly  and  indiscriminately  destroy 
all  that  at  present  exists,  with  this  single  thought  in  mind — to  destroy 
as  much  and  as  quickly  as  possible."  x  The  means  advocated  are 
of  a  most  varied  description :  **  Poison,  the  dagger,  and  the  sword 
.  .  .  revolution  makes  them  all  equally  sacred.  The  whole  field  is 
free  for  action."  a  Bakunin  had  always  shown  a  good  deal  of  sym- 
pathy for  the  role  of  the  conspirator.  In  the  Statutes  of  the  Inter- 
national Brotherhood,  which  prescribed  the  rules  of  conduct  for  a 
kind  of  revolutionary  association  created  by  Bakunin  in  1864,  are 
some  passages  advocating  violence  which  are  as  bloodcurdling  as 
anything  contained  in  NetchaiefP s  famous  Revolutionary  Catechism. 
It  is  difficult  to  find  lines  more  full  of  violent  revolutionary  exaspera- 
tion than  that  passage  of  the  Statutes  of  the  International  Socialist 
Alliance  which  forms  the  real  programme  of  the  anarchists.  Since 
it  also  seems  to  us  to  give  a  fairly  faithful  expression  of  Bakunin's 
thoughts  on  the  matter,  it  will  afford  a  fitting  close  to  our  exposition. 
"  We  want  a  universal  revolution  that  will  shake  the  social  and 
political,  the  economic  and  philosophical  basis  of  society,  so  that  of 
the  present  order,  which  is  founded  upon  property,  exploitation, 
dominion,  and  authority,  and  supported  either  by  religion  or 
philosophy,  by  bourgeois  economics  or  by  revolutionary  Jacobinism, 
there  may  not  be  left,  either  in  Europe  or  anywhere  else,  a  single 
stone  standing.  The  workers'  prayer  for  peace  we  would  answer 
by  demanding  the  freedom  of  all  the  oppressed  and  the  death  of 
everyone  who  lords  it  over  them,  exploiters  and  guardians  of  every 
kind.  Every  State  and  every  Church  would  be  destroyed,  together 
with  all  their  various  institutions,  their  religious,  political,  judicial, 
and  financial  regulations ;  the  police  system,  all  university  regula- 
tions, all  social  and  economic  rules  whatsoever,  so  that  the  millions 

1  Snzial-p  litischer,  p.  361.  The  proclamation  was  addressed  to  Young  Russia 
just  after  the  Tsar  Alexander  II  had  accepted  tile  challenge  of  Liberalism  by 
emancipating  the  serfs.  But  he  immediately  proceeded  to  revive  the  cruel 
system  of  espionage  and  repression  carried  out  by  his  father  Nicholas  I,  and  so 
roused  the  indignation  of  the  more  advanced  leaders,  who  thought  that  they  had 
in  him  a  hero  who  would  open  the  golden  gates  of  liberty.  Bakunin  at  the  time 
was  under  the  influence  of  an  unscrupulous  fanatic  of  the  name  of  Netchaieff, 
whose  savage  and  revolting  passion  for  the  execution  of  criminal  deeds  in  the 
name  of  revolution  had  completely  captivated  him.  Later  on  he  vigorously 
reproved  such  acts,  and  declared  that  they  ought  to  be  suppressed. 

•Ibid. 


640  THE  ANARCHISTS 

of  poor  human  beings  who  are  now  being  cheated  and  gagged, 
tormented  and  exploited,  delivered  from  the  cruellest  of  official 
directors  and  officious  curates,  from  all  collective  and  individual 
tyranny,  would  for  once  be  able  to  breathe  freely."  * 

A  discussion  of  anarchist  doctrine  lies  beyond  our  province. 
Moreover,  such  sweeping  generalisations  disarm  all  criticism.  Their 
theories  are  too  often  the  outbursts  of  passionate  feeling  and  scarcely 
need  refuting.  Let  us,  then,  try  to  discover  the  kind  of  influence 
they  have  had. 

We  are  not  going  to  speak  of  the  criminal  outrages  which 
unfortunately  have  resulted  from  their  teaching.  Untutored  minds 
already  exasperated  by  want  found  themselves  incapable  of  resisting 
the  temptations  to  violence  in  face  of  such  doctrines.  Such  deeds, 
or  active  propaganda  as  they  call  it,  can  have  no  manner  of  justifica- 
tion, but  find  an  explanation  in  the  extreme  fanaticism  of  the 
authors.  It  is  not  very  easy  to  attribute  such  violence  to  a  social 
doctrine  which,  according  to  the  circumstances,  may  on  the  one 
hand  be  considered  as  the  philosophy  of  outrage  and  violence,  and 
on  the  other  as  an  ideal  expression  of  human  fraternity  and 
individual  progress. 

The  influence  of  which  we  would  speak  is  the  influence  which 
anarchy  has  had  upon  the  working  classes  in  general.  Undoubtedly 
it  has  led  to  a  revival  of  individualism  and  has  begotten  a  reaction 
against  the  centralising  socialism  of  Marx.  Its  success  has  been 
especially  great  among  the  Latin  nations  and  in  Austria,  where  it 
seemed  for  a  time  as  if  it  would  supplant  socialism  altogether.  Very 
marked  progress  has  also  been  made  in  France,  Italy,  and  Spain. 
Is  it  because  individuality  is  stronger  in  those  countries  than 
elsewhere  ?  We  think  not.  The  fact  is  that  wherever  liberty 
has  only  recently  been  achieved,  order  and  discipline,  even 
when  freely  accepted,  seem  little  better  than  intolerable  signs  of 
slavery. 

An  anarchist  party  came  into  being  between  1880  and  1895.  But 
since  1895  it  seems  to  have  declined.  This  does  not  mean  that  the 
influence  of  anarchism  has  been  on  the  wane,  but  simply  that  it 
has  changed  its  character.  In  France  especially  many  of  the  older 
anarchists  have  joined  the  Trade  Union  movement,  and  have  occa- 
sionally managed  to  get  the  control  of  affairs  into  their  own  hands, 
and  under  their  influence  the  trade  unions  have  tried  to  get  rid  of 
the  soclialist  yoke.  The  Confederation  generate  du  Travail  has  for 
its  motto  two  words  that  are  always  coupled  together  in  anarchist 
1  Bakimin,  Sozial-politischer,  p,  332. 


REVOLUTION  641 

literature,  namely,  "  Welfare  and  liberty."  It  has  also  advocated 
"  direct  action  " — that  is,  action  which  is  of  a  definitely  revolutionary 
character  and  in  defiance  of  public  order.  Finally,  it  betrays  the 
same  impatience  with  merely  political  action,  and  would  have  the 
workers  concentrate  upon  the  economic  struggle. 

The  prophets  of  revolutionary  syndicalism  deny  any  alliance 
with  anarchy.  But,  despite  their  protests,  it  would  be  a  compara- 
tively easy  matter  to  point  to  numerous  analogies  in  the  writings  of 
Bakunin  and  Kropotkin.  Moreover,  they  admit  that  Proudhon,  as 
well  as  Marx,  has  contributed  something  to  the  syndicalist  doctrine ; 
and  we  have  already  noted  the  intimate  connection  which  exists 
between  Proudhon  and  the  anarchists. 

The  first  resemblance  consists  in  their  advocacy  of  violence  as  a 
method  of  regenerating  and  purifying  social  life.  "  It  is  to  violence," 
writes  M.  Sorel,  "  that  socialism  owes  those  great  moral  victories 
that  have  brought  salvation  to  the  modern  world."  *  The  anarchists 
in  a  similar  fashion  liken  revolution  to  the  storm  that  clears  the 
threatening  sky  of  summer,  making  the  air  once  more  pure  and  calm. 
Kropotkin  longs  for  a  revolution  because  it  would  not  merely 
renew  the  economic  order,  but  would  also  "stir  up  society  both 
morally  and  intellectually,  shake  it  out  of  its  lethargy,  and  revive 
its  morals.  The  vile  and  narrow  passion  of  the  moment  would  be 
swept  aside  by  the  strong  breath  of  a  nobler  passion,  a  greater 
enthusiasm,  and  a  more  generous  devotion."  * 

In  the  second  place,  moral  considerations,  which  find  no  place 
in  the  social  philosophy  of  Marx,  are  duly  recognised  by  Sorel  and 
by  the  anarchist  authors.  Bakunin,  Kropotkin,  and  Proudhon 
especially  demand  a  due  respect  for  human  worth  as  the  condition 
of  every  man's  liberty.  They  also  proclaim  the  sovereignty  of  reason 
as  the  only  power  that  can  make  men  really  free.  M.  Sorel,  after 
showing  how  the  new  school  may  be  easily  distinguished  from  official 
socialism  by  the  greater  stress  which  it  lays  upon  the  perfection  of 
morals,  proceeds  to  add  that  on  this  point  he  is  entirely  at  one  with 
the  anarchists.8 

Finally,  their  social  and  political  ideals  are  the  same.  In  both 
cases  the  demand  is  for  the  abolition  of  personal  property  and  the 
extinction  of  the  State.  "  The  syndicalist  hates  the  State  just  as 
much  as  the  anarchist.  He  sees  in  the  State  nothing  but  an  unpro- 
ductive parasite  borne  upon  the  shoulder  of  the  producer  and  living 


1  Reflexions  sur  la  Violence,  p.  263. 
1  Paroles  d"un  Rcvolte,  pp.  17-18. 


•  Reflexions  sur  la  Violence,  p.  218. 
v.p. 


642  THE  ANARCHISTS 

upon  his  substance."  1  And  Sorel  regards  socialism  as  a  tool  in  the 
hands  of  the  workers  which  will  some  day  enable  them  to  get  rid  of 
the  State  and  abolish  the  rights  of  private  property.2  "  Free 
producers  working  in  a  factory  where  there  will»be  no  masters  "  * — 
such  is  the  ideal  of  syndicalism,  according  to  Sorel.  There  is  also  the 
same  hostility  shown  towards  democracy  as  at  present  constituted 
and  its  alliance  with  the  State. 

But  despite  many  resemblances  the  two  conceptions  are  really 
quite  distinct.  The  hope  of  anarchy  is  that  spontaneous  action  and 
universal  liberty  will  somehow  regenerate  society.  Syndicalism 
builds  its  faith  upon  a  particular  institution,  the  trade  union,  which 
it  regards  as  the  most  effective  instrument  of  class  war.  On  this 
basis  there  would  be  set  up  an  ideal  society  of  producers  founded 
upon  labour,  from  which  intellectualism  would  be  banished.  Anarchy, 
on  the  other  hand,  contents  itself  with  a  vision  of  a  kind  of  natural 
society,  which  the  syndicalist  thinks  both  illusory  and  dangerous. 

It  has  not  been  altogether  useless,  perhaps,  to  note  the  striking 
analogy  that  exists  between  these  two  currents  of  thought  which  have 
had  such  a  profound  influence  upon  the  working-class  movement 
during  the  last  fifteen  years,  and  which  have  resulted  in  a  remarkable 
revival  of  individualism. 

1  Berth,  Let  Nouveaux  Aspects  du  Socialisme,  p.  3. 

2  Reflexions  sur  la  Violence,  introduction. 
a  Ibid.,  p.  237, 


CONCLUSION  648 

CONCLUSION 

CAN  a  history  of  economic  doctrines  really  be  said  to  have  a  con- 
clusion ? 

It  is  obviously  impossible  to  regard  the  history  of  any  science 
as  complete  so  long  as  that  science  itself  is  not  definitely  constituted. 
This  applies  to  all  sciences  alike,  even  to  the  more  advanced 
— physics,  chemistry,  and  mathematics,  for  example,  all  of  which 
are  continuously  undergoing  some  modification,  abandoning  in  the 
course  of  their  progress  certain  conceptions  that  were  formerly 
regarded  as  useful,  but  which  now  appear  antiquated,  and  adopting 
others  which,  if  not  entirely  new,  are  at  least  more  comprehensive 
and  more  fruitful.  And  not  only  is  this  true  of  individual  sciences, 
but  it  is  equally  true  of  the  very  conception  of  science  itself.  Pro- 
gress in  the  sciences  involves  a  modification  of  our  ideas  concerning 
science.  The  savant,  to-day  as  of  yore,  is  engaged  in  the  pursuit 
of  truth,  but  the  conception  of  scientific  truth  at  the  beginning  of 
the  twentieth  century  is  not  what  it  was  at  the  beginning  of  the 
nineteenth,  and  everything  points  to  still  further  modifications  of 
that  conception  in  the  future.  It  is  scarcely  to  be  expected  that 
political  economy,  a  young  science  hardly  out  of  its  swaddling- 
clothes,  will  prove  itself  less  mutable  than  the  sciences  already 
mentioned.  All  that  the  historian  is  permitted  to  do  is  to  point 
to  the  distance  already  traversed,  without  pretending  to  be  able 
to  guess  the  character  of  the  road  that  still  remains  to  be  covered. 
His  object  must  be  to  appreciate  the  nature  of  the  tasks  that  now 
await  the  economist,  and  for  this  his  study  of  the  efforts  put  forth 
in  the  past,  to  which  the  preceding  chapters  bear  record,  should 
prove  of  some  assistance. 

A  simple  analogy  will  perhaps  help  us  to  gauge  the  kind  of 
impression  left  upon  us  by  a  study  of  a  century  and  a  half  of  economic 
ideas.  Imagine  ourselves  looking  at  a  fan  spread  out  in  front  of 
us.  At  the  handle  the  separate  radii  are  so  closely  packed 
together  that  they  appear  to  form  a  single  block.  But  as  the  eye 
travels  towards  the  circumference  the  branches  gradually  separate 
from  one  another  until  they  finally  assume  quite  divergent  posi- 
tions. But  their  separation  is  not  complete,  and  the  more  they 
are  spread  out  the  easier  it  is  to  detect  the  presence  of  the  tissue 
that  forms  a  common  bond  between  the  various  sections  of  the  fan 
and  constitutes  the  basis  of  a  new  unity  which  is  quite  as  powerful, 
if  not  perhaps  more  so,  than  the  unity  which  results  from  their 
superposition  at  the  base. 


644  CONCLUSION 

So  it  was  with  the  Physiocrats,  and  still  more  with  Adam  Smith, 
whose  theory  of  political  economy  was  a  doctrine  of  such  beautiful 
simplicity  that  the  human  mind  could  grasp  it  at  a  single  glance. 
But  as  time  went  on  and  the  science  progressed  it  was  realised 
that  the  unity  which  characterised  it  at  first  was  more  apparent 
than  real.  The  contradictory  theories  which  Smith  had  seemed  able 
to  reconcile  gave  rise  to  new  currents  of  thought,  which  tended  to 
drift  farther  and  farther  apart  as  they  assumed  a  greater  degree 
of  independence.  Conflicting  theories  of  distribution  and  of  value 
began  to  take  the  field,  and  quarrels  arose  over  the  relative  merits 
of  the  abstract  and  the  historical  method,  or  the  claims  of  society 
and  the  rights  of  the  individual.  With  a  view  to  self-defence,  each 
of  these  schools  took  its  own  path,  which  it  followed  with  varied 
fortune,  including  not  a  few  setbacks.  Each  of  them  also  sur- 
rounded itself  with  a  network  of  observations  and  inductions,  thus 
bringing  into  the  common  fund  a  wealth  of  new  truths  and  useful 
conclusions.  All  this  has  resulted  in  the  gradual  formation,  around 
each  great  current  of  economic  thought,  of  a  thick  enveloping  layer 
of  great  resistance  and  of  increasing  extent,  which  constitutes  a  kind 
of  common  scientific  matrix  uniting  them  together,  and  underneath 
which  may  still  be  detected  the  salient  features  of  the  great  systems. 
What  strikes  us  now  is  not  the  multiplicity  of  branches  which  go 
to  make  up  the  fan,  but  the  presence  of  the  common  tissue  in 
which,  especially  towards  the  circumference,  the  different  radii 
seem  to  lose  themselves  and  to  disappear  altogether.  In  other 
words,  the  sum  total  of  acquired  truths  is  the  only  legacy  left  us 
by  the  various  systems  of  the  past,  and  this  is  the  only  thing  that 
interests  us  to-day. 

Hence  one  result  of  so  much  discussion  and  polemical  warfare 
has  been  the  discovery  of  some  common  ground  upon  which  all 
economists,  whatever  their  social  and  political  aspirations,  can 
meet.  This  common  ground  is  the  domain  of  economic  science — 
a  science  that  is  concerned,  not  with  the  presentation  of  what  ought 
to  be,  but  with  the  explanation  and  the  thorough  understanding 
of  what  actually  exists.  The  superiority  of  a  theory  is  measured 
solely  by  its  explanatory  power.  It  matters  little  whether  its 
author  be  Interventionist  or  Liberal,  Protectionist  or  Free  Trader, 
Socialist  or  Individualist — everyone  must  necessarily  bow  before 
an  exact  observation  or  a  scientific  explanation. 

But  while  these  divergent  schools  tend  to  be  lost  in  the  unity 
of  a  more  fully  comprehended  science,  we  see  the  emergence  of 
other  divisions,  less  scientific  perhaps,  but  much  more  fertile  so 


CONCLUSION  645 

far  as  the  progress  of  the  science  itself  is  concerned.  It  seems  as 
if  a  new  kind  of  fan  arrangement  were  making  its  appearance  under- 
neath the  old. 

This  is  obviously  the  case  with  regard  to  method,  for  example, 
where  the  separation  between  pur  and  descriptive  economics,  or 
between  the  theoretical  systematisation  and  the  mere  observation 
of  concrete  phenomena,  is  becoming  very  pronounced.  Both  kinds 
of  research  are  equally  necessary,  and  demand  different  mental 
qualities  which  are  very  seldom  found  combined  in  the  same  person. 
Economic  science,  however,  cannot  afford  to  dispense  either  with 
theory  or  observation.  The  desire  to  seize  hold  of  the  chain  of 
economic  phenomena  and  to  unravel  its  secret  connections  is  as 
strong  as  ever  it  was.  On  the  other  hand,  in  view  of  the  trans- 
formation and  the  daily  modifications  which  industry  everywhere 
seems  to  be  undergoing,  it  is  useless  to  imagine  that  we  can  dispense 
with  the  task  of  observing  and  describing  these.  The  two  methods 
are  developing  and  progressing  together,  and  the  violent  quarrels 
as  to  their  respective  merits  appear  to  be  definitely  laid  at  rest. 

Accordingly  what  we  find  is  a  segmentation  of  economic  science 
into  a  number  of  distinct  sciences,  each  of  which  tends  to  become 
more  or  less  autonomous.  Such  separation  does  not  necessarily 
imply  a  conflict  of  opinion,  but  is  simply  the  outcome  of  division 
of  labour.  At  the  outset  of  its  career  the  whole  of  political  economy 
was  included  within  the  compass  of  one  or  two  volumes,  and  all 
those  facts  and  theories  of  which  an  economist  was  supposed  to 
have  special  knowledge  were,  according  to  Say  and  his  disciples, 
easily  grouped  under  the  three  heads  of  Production,  Consumption, 
and  Distribution.  But  since  then  the  science  has  been  broken 
up  into  a  number  of  distinct  branches.  The  term  "  physics," 
which  was  formerly  employed  as  a  name  for  one  of  the  exact 
sciences,  is  just  now  little  better  than  a  collective  name  used  to 
designate  a  number  of  special  sciences,  such  as  electricity,  optics, 
etc.,  each  of  which  might  claim  the  lifelong  devotion  of  the 
student.  Similarly  "political  economy  "  has  just  become  a  vague 
but  useful  term  to  denote  a  number  of  studies  which  often  differ 
widely  from  one  another.  The  theory  of  prices  and  the  theory  of 
distribution  have  undergone  such  modifications  as  entitle  them 
to  be  regarded  as  separate  studies.  Social  economics  has  carved 
out  a  domain  of  its  own  and  is  now  leading  a  separate  existence, 
the  theory  of  population  has  assumed  the  dimensions  of  a  special 
science  known  as  demography,  and  the  theory  of  taxation  is  now 
known  as  the  science  of  finance.  Statistics,  occupying  the  border- 


646  CONCLUSION 

land  of  these  various  sciences,  has  its  own  peculiar  method  of  pro* 
cedure.  Descriptions  of  the  commercial  and  industrial  mechanism 
of  banks  and  exchanges,  the  classification  of  the  forms  of  industry 
and  the  study  of  its  transformations  are  related  to  political  economy 
much  as  zoology,  descriptive  botany,  and  morphology  are  related 
to  the  science  of  natural  history.  And  although  a  different  name 
must  not  always  be  taken  as  evidence  of  a  different  science,  there 
is  little  doubt  about  the  existence  of  the  separate  sciences  already 
enumerated.  The  difficulty  rather  is  to  grasp  the  connection 
between  them  and  to  realise  the  nature  of  that  fundamental  unity 
which  binds  them  all  together. 

But  there  still  remains  a  wide  region  over  the  whole  of  which 
divergences  exist  and  conflicts  continue,  and  where,  moreover, 
they  will  probably  never  cease.  This  is  the  realm  of  social  and 
political  economics. 

Despite  the  gradual  rise  of  a  consensus  of  scientific  opinion  among 
economists,  the  divergences  concerning  the  object  that  should  be 
pursued  and  the  means  employed  to  achieve  that  end  are  as  pro- 
nounced as  ever.  Each  of  the  chief  doctrines  of  which  we  have  given 
an  exposition  in  the  course  of  this  work  has  its  body  of  representa- 
tives. Liberals,  Communists,  Interventionists,  State  and  Christian 
Socialists  continue  to  preach  their  differing  ideals  and  to  advocate 
different  methods  of  procedure.  On  the  question  of  the  science 
itself,  however,  they  are  all  united.  The  arguments  upon  which 
they  base  then*  contentions  are  largely  borrowed  from  sources 
other  than  scientific.  Moral  and  religious  beliefs,  political  or 
social  convictions,  individual  preference  or  sentiment,  personal 
experience  or  interest — these  are  among  the  considerations  deter- 
mining the  orientation  of  each.  The  earlier  half  of  the  nineteenth 
century  witnessed  the  science  of  political  economy  making  com- 
mon cause  with  one  particular  doctrine,  namely,  Liberalism.  The 
alliance  proved  most  unfortunate.  The  time  when  economic 
doctrines  were  expected  to  lend  support  to  some  given  policy  is 
for  ever  gone  by.  But  the  lesson  has  not  been  lost,  and  everybody 
realises  that  nothing  could  be  more  dangerous  for  the  development 
of  the  science  than  to  link  its  teaching  to  the  tenets  of  some 
particular  school  At  the  same  time  the  science  might  conceivably 
furnish  valuable  information  to  the  politician  by  enabling  him  to 
foresee  the  results  of  such  and  such  a  measure ;  and  it  is  to  be  hoped 
that  such  predictions,  all  too  uncertain  as  yet,  may,  accordingly, 
become  more  precise  in  the  future. 

We  cannot,  then,  suppose  that  the  various  currents  of  opinion 


CONCLUSION  647 

to-day  known  as  Liberalism,  Socialism,  Solidarism,  Syndicalism, 
and  Anarchism  are  likely  to  disappear  in  the  immediate  future. 
They  may  be  given  other  names,  perhaps,  but  they  will  always 
continue  to  exist  in  some  form  or  other,  simply  because  they 
correspond  to  some  profound  tendency  in  human  nature  or  to 
certain  permanent  collective  interests  which  alternately  sway  man- 
kind. 

We  cannot  pretend  to  regret  this.  Uniformity  of  belief  is  an 
illusory  ideal,  and  from  a  purely  practical  point  of  view  we  should 
be  sorry  to  see  the  day  when  there  will  be  no  conflict  of  opinion 
even  about  those  causes  or  those  methods  which  we  hold  most  dear. 

We  may  sum  up  our  conclusions  as  follows :  From  a  scientific 
standpoint  unity  is  likely  to  become  more  pronounced  and  collabora- 
tion much  more  general  than  in  the  past,  thanks  to  the  adoption 
of  more  scientific  methods. 

In  the  domain  of  practice  the  variety  of  economic  ideals  and 
the  conflict  between  them  is  likely  to  continue. 

Such,  it  seems  to  us,  will  be  the  spectacle  presented  by  the  political 
economy  of  the  future. 

Thus  the  impression  obtained  from  a  perusal  of  this  history  of 
economic  doctrines  is,  if  not  somewhat  melancholy,  at  least  sufficient 
to  justify  a  certain  degree  of  humility.  So  many  doctrines  that  we 
thought  definitely  established  have  disappeared  altogether,  and  so 
many  that  we  thought  completely  overthrown  have  been  rehabili- 
tated. Those  that  die  do  not  seem  altogether  dead,  somehow,  and 
those  that  are  revived  are  not  quite  the  same. 

What  the  science  and  its  teachers  need  most  of  all  is  full  and 
complete  liberty — liberty  to  follow  whatever  method  suits  them 
best  and  to  accept  whatever  theory  attracts  them  most ;  liberty  to 
choose  their  own  ideals  and  to  formulate  their  own  systems — for 
systems  and  ideals,  by  bringing  sentiment  into  play,  may  occasionally 
prove  very  stimulating  even  to  scientific  research.  Nothing  could 
be  more  harmful  than  the  dogmatism  which  the  science  has  only 
recently  escaped.  In  this  matter,  unfortunately,  no  school  and  no 
country  is  entirely  above  criticism. 

Sismondi  used  to  complain  that  Liberalism,  after  it  had  achieved 
its  triumph,  had  attempted  to  convert  political  economy  into  a 
system  of  orthodoxy.  But  Liberalism  is  not  the  only  doctrine 
against  which  a  similar  charge  might  be  brought.  It  is  only  a 
few  years  since  Schmoller,  the  chief  of  the  German  Historical 
school,  in  an  address  delivered  as  Rector  of  Berlin  University, 
declared  that  neither  Marxians  nor  the  disciples  of  Smith  could  in 


648  CONCLUSION 

future  be  regarded  as  accredited  teachers  of  the  science.  Does  the 
German  Historical  school  really  wish  to  revive  that  ostracism  from 
which  it  was  itself  one  of  the  first  to  suffer?  Neither  can  we,  as 
Frenchmen,  pride  ourselves  upon  having  been  less  exclusive.  The  in- 
difference or  even  the  actual  hostility  with  which  the  Historical 
school  was  for  a  long  time  treated  does  very  little  credit  to  us. 
Moreover,  that  same  intolerance  of  which  "  bourgeois  economics  " 
was  so  justly  accused,  is  it  not  to  be  met  with  in  an  equally  extra- 
vagant fashion  in  the  socialism  of  to-day  ?  The  ultra-dogmatism 
of  the  Liberal  school  can  be  easily  paralleled  from  the  history  of 
Marxism  and  the  frantic  efforts  made  by  some  socialists  to  prevent 
other  Marxians  making  a  breach  in  the  doctrine.  If  there  is  one 
lesson  more  than  another  that  emerges  from  a  study  of  the 
history  of  economic  doctrines  it  is  the  necessity  for  a  more  critical 
spirit  and  a  more  watchful  attitude,  always  ready  to  test  any  new 
truths  that  present  themselves,  to  extend  a  hearty  welcome  to 
every  fresh  observation  or  new  experience,  thus  enabling  the  science 
to  enlarge  its  scope  and  gain  a  deeper  significance  without  sacrificing 
any  of  its  essential  tenets. 


INDEX 


In  the  longer  paragraphs  a  number  standing  alone,  and  separated  by  a 

semicolon   from  the  preceding  sentence,  indicates  a  reference   of   smaller 

importance.     Such  numbers  are,  of  course,  not  connected  with  the  sentence 

preceding  them. 


"ABBOTS'  PARTY,"  608 

Ability,  rent  of,  549-552,  682,  583 

"  Abstinence,"  350 

"  Abuse  of  rights,"  606 

Act  of  Union  of  1707,  Adam  Smith  on, 
266 

Act  of  Union  of  1800,  104 

Adamson,  Professor,  529  ». 

Adler,  G.,  615  n. 

Aftalion,  A.,  184  n. 

Agneta  Park,  255 

Agoult,  Mme.  d',  292  n. 

Agriculture,  the  sole  source  of  the  "  net 
product,"  12,  14  ;  the  Physiocratio  in- 
fluence upon  the  conception  of,  17 ; 
the  inherent  distinction  between  in- 
dustry and,  17-18 ;  workers  in, 
ignored  by  the  Physiocrats,  22  n. ; 
Condillac  on,  49  n. ;  viewed  by 
Quesnay  as  the  source  of  all  wealth,  56  ; 
Smith  and  the  superior  productivity 
of,  64,  90,  112;  Smith's  admiration 
for,  67-68;  Buchanan  on,  143;  the 
future  of,  155-157  ;  Last  and  Protection 
and,  276  and  n. ;  Carey  and  Protection 
and,  283 

Agriculturist,  the,  predominant  import- 
ance of,  in  the  Physiocratic  hierarchy 
of  classes,  (Jl 

Aix-la-Chapolle,  281  n. 

Alexander  II,  Tsar,  639  ». 

Algeria,  339  n. 

Allgemeiner  deutscher  Arbeiterverein, 
432 

Allix,  M.,  117  n.,  207  n. 

AUon  Locke,  504 

America — see  United  States 

Anarchism,  vii,  XT  ;  the  development  of, 
516;  a  fusion  of  Liberal  and  socialist 
doctrines,  614;  and  the  State,  615, 
623-624,  625,  626,  627  ;  Proudhon  the 
father  of,  615 ;  indebtedness  of,  to 
Greek  philosophy,  615  n. ;  philosophical 
and  literary  anarchism,  615,  619 ; 
Stirner  and  the  cult  of  the  individual, 
615-619;  and  syndicalism,  619  n. ; 
Bakunin,  619-620;  Kropotkin,  621- 
622 ;  Llio  principles  of  social  and  political 
anarchism,  622-629 ;  and  the  in- 
dividual, o-^-O-ii;  and  humanity,  623 ; 


and  government,  624-627 ;  and  pro- 
perty, 626-627;  and  marriage,  627; 
and  free  contract,  627-628 ;  and 
reason  and  science,  628-629,  641  ;  the 
anarchist  conception  of  society,  629- 
636 ;  criticism  of  the  social  ideal,  634- 
636 ;  and  revolution,  637-640,  641 ; 
ita  influence,  640-642;  and  in- 
dividualism and  socialism,  640  ;  and 
syndicalism,  641  ;  the  moral  element 
in  the  doctrine,  641 

Anarchists,  and  the  cult  of  the  "  noble 
savage,"  7 

Anarchy,  Proudhon  and,  311  n. 

Anderson,  J,  148  n.-149  n. 

Andler,  C.,  321  n.,  416  n.,  435  n. 

Antoine,  Father,  499  n. 

Antonelli,  £.,  251  n.,  537  n. 

Argenson,  Marquis  d',  11  n. 

Aristotle,  401 ;  on  value,  461  n. ;  590  «. 

Arkwright,  R.,  65 

Ashley,  W.  J.,  T,  vi,  xi,  386  n.,  387, 
391  n.,  406 

Association,  231,  233  ;  Robert  Owen  and, 
237 ;  Blano  and,  256,  257,  260,  263 ; 
Buchez  and,  258  ;  Leroux  and,  263  ; 
Cabet  and,  263-264;  Proudhon  and, 
297  and  nn.,  315  n. ;  300  ;  the  French 
Liberal  school  and,  325 ;  Stuart  Mill 
and,  370 ;  Le  Play  and,  491  n. ;  the 
Christian  Socialists  and,  504-506, 607  n.; 
Kingsley  on,  505  n. ;  solidarity  and, 
602,  613-614  ;  and  exchange,  613  n. 

Associative  socialists,  227,  231-235; 
and  the  Physiocrats,  232-233;  and 
competition,  233-234;  Blano  and,  263 

Au  bur  tin,  F.,  487  n. 

Auouy,  M.,  316  n. 

Aulard,  F.,  200  ». 

Aupetit,  J.  J.,  529  n.,  530  H.,  537  »., 
539  n.,  643  n. 

AuspitK,  Herr,  529  n. 

Austria,  and  the  Zollverein,  268 ;  Social 
Catholicism  in,  490  n. ;  anarchism  in, 
640 

Austrian  school,  XT,  48, 397n.,  521,  522  o, 
541,  644  and  n.,  581 

Avarice*  foncieres,  22,  23  ».,  25 

Avancts  touvcraines,  38  n. 

Aveuel,  M.  d',  546 


0441 


650 


INDEX 


BABETTF,  F.,  200  and  nn.,  256,  436  n. 

"  Back  to  the  land,"  in  Fourier's  sys- 
tem, 251-252  ;  Tolstoy  and,  513 

Baden,  268  n. 

Baden,  the  Margrave  of  (AbbeRoubaud), 
and  the  Physiocrats,  4  n.,  5 ;  the 
Physiocratic  experiment  of,  44 

Bakunin,  M.,  449  n.,  459  n.,  615,  616, 
619-620,  621.  622,  623,  624,  626  and 
nn.,  627,  628,  630,  631  n.,  634  »., 
637-640,  641 

14  Balance  of  trade  "  theory,  Mercier  de 
la  Riviere  on,  31  ;  David  Hume  and, 
53 ;  Adam  Smith  and,  98 ;  Rioardo 
and,  163-165  ;  285  ;  List  and,  285  n. 

Bank  Act,  English,  of  1822,  166;  of 
1844,  166 

Bank  of  Amsterdam,  85 

Bank,  Bonnard's,  316  ».-317  n. 

Bank  of  England,  166 

Bank  of  Exchange — see  Exchange  Bank 

Bank  of  France,  305,  311,  312,  314, 
638 

Bank-notes,  Adam  Smith  and,  85,  96 ; 
Ricardo  and,  165-167 :  and  Proud- 
hon's  exchange  notes,  311-312 

Banks,  Adam  Smith  and,  85,  96 ; 
Ricardo  and,  138,  139  n.,  163,  167; 
in  the  Saint-Simonians'  system,  218- 
219  and  n.,  226  ;  Fourier's  co-operative, 
251  n. ;  influence  on  crises  in  the 
money  market,  285  n. ;  Count  Mollien 
and,  314  ;  the  Raiffeisen  agricultural 
credit  banks,  503  n. 

Barone,  Signer  M.,  529  n. 

Barres.  A.  M.,  254  n. 

Bastiat,  F.,  xv,  92,  93,  115,  117,  118  n., 
146  n.,  156,  160,  163  n.,  223  n.,  277  n. ; 
and  the  Classical  school,  322  ;  and 
Protection,  323,  328  n.,  329;  324; 
and  liberty,  324  n. ;  and  State  inter- 
vention, 325  n.,  408-409;  and  the 
Liberal  school,  327  ;  Carey  and,  327- 
328  ;  his  career,  328  n. ;  and  socialism, 
328  n.,  329  ;  criticism  of,  329  ;  esti- 
mate of  his  work,  329  and  n. ;  and 
individualism,  330 ;  his  theory  of 
universal  harmony,  330-346  ;  and  the 
Providential  order,  331  ;  his  theory  of 
service- value,  332-335  ;  and  Proud- 
hon,  333  n.-334  n. ;  his  law  of  free 
utility,  335-337  ;  and  the  proprietor, 
336;  and  rent,  337-340,  425,  545, 
546 ;  and  the  relation  of  profits  to 
wages,  340-342,  427 ;  on  the  sub- 
ordination of  producer  to  consumer, 
342-343;  and  solidarity,  344-345; 
363  n. ;  and  international  exchange, 
365 ;  and  Optimism,  377 ;  and  the 
State,  438  n.,  439;  459  n.,  616,  572, 
589;  his  fable,  The  Blind  and  the 
Paralytic,  608  ;  617,  624  ;  and  govern- 
ment and  society,  631  n. 

Baudeau,  the  Abbe,  on  the  Physiocrats, 


3  n. ;  a  member  of  the  Physiocratic 
school,  4  n. ;  on  the  "  natural  order," 
10  ;  on  the  productivity  of  agricul- 
ture, 13  n. ;  on  industry  and  com- 
merce, 13  ;  on  the  Tableau  economiqw, 
18  n.,  20  n. ;  on  the  dependence  of  the 
productive  classes  on  the  landed  pro- 
prietors, 22  n. ;  OB  the  landed  pro- 
prietors as  nobility,  22  n. ;  and  the 
origin  and  justification  of  private 
property,  22  ;  on  the  avances  foncieres, 
23  n.,  25  n. ;  on  the  duties  of  landed 
proprietors,  25 ;  on  the  regard  to 
be  paid  to  the  peasants,  26 ;  on  use- 
less laws,  33  n.  •  on  the  Greek  states, 
34  n. ;  on  the  sovereignty  of  the 
people,  36  n. ;  on  the  supreme  will, 
36  n.  ;  on  education,  37  ;  on  inter- 
national antagonism,  37  n  •  on  the 
three  errors  of  States,  37  n.-38  n. ;  on 
avances  gouveraines,  38  n. ;  on  the 
revenue  from  land,  40  n. ;  on  the 
sovereign,  41  n. ;  on  the  gross  and  net 
revenue,  43  n. ;  118  n. 

Bauer,  Bruno,  616 

Bauer,  Professor  S.,  19  nn. 

Bavaria,  Tariff  Union  between  Wurtem. 
berg  and,  268 

Bazard,  St.  A.,  201  n.,  211,  212,  213 

Bebel,  F.  A.,  437 

Bentham,  J.,  96  n.,  686 

Beranger,  J.  P.  de,  331 

Berens,  E.,  547  n. 

Bergson,  H.,  403  n. 

Bernstein,  E.,  473,  474  n.,  475  and  n., 
479,  480  n. 

Berth,  E\,  479  n.,  619  n.,  642  n. 

Berthelemy,  H.,  569  n. 

Biological  method,  544  n. 

Biological  Naturalism,  the  school  of, 
593  n. 

Bismarck,  Prince,  and  Lassalle,  414 ; 
436  ;  and  State  Socialism.  445 

Blanc,  Louis,  169,  198,  227,  235  ;  quality 
of  his  work,  255-256 ;  and  competi- 
tion, 256-257,  260  ;  and  association, 
257-261,  263  ;  and  interest,  259-260  ; 
a  pioneer  of  State  Socialism,  261,  262, 
414 ;  and  State  intervention,  262, 
414  ;  290  ;  Proudhon  and,  296  n. ; 
300  ;  and  the  Revolution  of  1848,  300- 
306  ;  Lassalle  and,  434  ;  599,  607  n. 

Blanqui,  A.,  197,  295 

Blind  and  the  Paralytic,  The,  Bastiat'a 
fable,  608 

Block,  M.,  375 

Bohm-Bawerk,  E.  von,  on  capital,  71  n. ; 
on  Adam  Smith's  conception  of  the 
determinant  of  value,  78  n.-lQ n.;  150; 
and  Bastiat,  329  ;  474  n.,  616  ;  on  the 
Classical  school,  518  n.  ;  on  wages,  520; 
522  n. ;  on  final  utility,  523  n. ;  hia 
theory  of  interest,  530,  540;  541  »., 
583 


INDEX 


651 


Boisguillebert,  P.,  29  n.,  33  n.,  54 

Bon  prix,  the,  15-16,  29,  45 

Bonar,  J.,  52  n.,  121 

Bonnard's  Bank,  316  n.-317  n. 

Booth,  C.,  388 

Bortkevitch,  V.,  529  n. 

Bougie,  C.,  594  n. 

Bourgeois,  L.,  593-599,  603  nn.,  605  n. 

Bourgin,  H.,  201  n.,  246  n.,  265  n. 

Bourguin,  M.,  231  n.,  320  n.,  449  n. 

BourDville,  255,  513  a. 

Bouvier,  M.,  538  n. 

Boyve,  M.  de,  508  n. 

Brandes,  G.,  432  n, 

Brants,  V.,  ri 

Braun,  K.,  368 

Bray,  J.  F.,  315,  316 

"Brazen  law  of  wages,"  the,  361,  426, 

433,  453  n.,  541 
Brentano,  L.,  386,  389  n. 
Briand,  M.,  251  n. 
Bright,  John,  366 

Brissot  de  Warville,  J.  P.,  200  ».,  292  ». 
Brodnitz,  Heir,  445  n. 
Brook  Farm,  255  n. 
Brunetiere,  F.,  485  n. 
Brunhes,  Mmo.,  510  n. 
Brunswick,  268  n. 
Buccleuoh,  Duke  of,   and  Adam  Smith. 

51  n. 

Buchanan,  J.,  52  n.,  143 
Biicher,  K.,  252  n.,  271  ».,  386,  397 
Bucher,  L.,  414 
Buchez,  P.,  258,   259,  306,  496  and  n., 

505 

Buffon,  the  Comte  de,  121,  523  n. 
Buisson,  M.,  249  n.,  603  n. 
Buonarotti,  F.,  256  and  n. 
Bureau,  P.,  493  n.,  495  ». 
Buret,  A.  E.,  197 
Burgin,  M.,  95  n. 

CABET,  £,  233,  235,  246,  263-264,  290, 
296  ».,  297 

Cairnes,  J.  E.,  329,  374-375,  387 

Calvin,  John,  503  n. 

Cameralists,  110,  383 

Campanella,  T.,  200  n.,  246 

Cannan,  Dr.  E.,  v,  52  n.,  56  n.,  71  n., 
79  n.,  145  and  n.,  427  n.,  549  n. 

Canonists,  the,  110 

Cantillon,  R.,  46 

Capital,  Adam  Smith  and,  56,  71-73,  89- 
91  ;  Ricardo  and  the  identification  of, 
with  labour,  149-150  ;  the  law  of  the 
concentration  of,  187;  Saint-Simon 
and  206,  214;  the  Saint-Simonians 
and,  214 ;  Proudhon  and,  293,  308-309, 
310,  313-314 ;  Bastiat  and,  340-342  ; 
Colson  and,  342  n. ;  Dunoyer  on,  347  n.; 
Senior  and,  350  ;  Marx  and,  455-465  ; 
Marx's  law  of  the  concentration  of, 
459^65,  475-476  ;  the  socialist's  con- 
ception of,  459-460;  the  Marxian 


school  and,  467  n. ;  the  productivity 
theory  of,  502 ;  final  utility  and, 
528 ;  the  rent  of,  548-549  n.,  558  n. ; 
the  rent  of  fixed,  556,  583;  Henry 
George  on  the  relation  of  labour  to, 
564-565  ;  co-operators  and,  605  n. 

Capitalism,  Marx  and,  461-462 

Carey,  H.  C.,  and  trade,  28  ;  and  rent, 
115,  338-340,425,  545,  546;  156,  278; 
and  Protection,  282-284;  and  Free 
Trade,  282-283 ;  and  Lost,  284 ;  289 
n. ;  and  the  Optimistic  school,  327 ; 
and  Bastiat,  327-328,  340;  and  the 
Ricardian  theory  of  value,  332;  333 
n. ;  and  Bastiat's  profits  theory,  342 
n. ;  and  solidarity,  345 ;  his  popula- 
tion theory,  346  ;  549,  572 

Carey,  M.,  278 

Carlyle,  T.,  196,  511,  512  n, 

Camot,  H.,  212,  213  a. 

Carnot,  S.,  367  n. 

Carrel,  A.,  212 

Cartwright,  E.,  65 

Carver,  J.  N.,  522  n. 

Catherine,  Empress  of  Russia,  and  the 
Physiocrats,  5 ;  and  Mercier  de  la 
Rividre,  34 

Catholic  Church,  Roman,  485 

Cataolic  Socialism,  495 

Catholicism,  and  the  economic  order, 
483  n.,  484  n. ;  Social  Catholicism, 
495-503 

Cauwes,  P.,  285  n. 

Cazamian,  L.,  510  n. 

Chain  bre  consultative  des  Associations  da 
Production,  257  n. 

Channing,  W.  E.,  255  n.,  504  n. 

Chapelier,  Le,  decree  of,  233  n. 

Chaptal,  J.  A.,  112,  277  n.,  278  n.,  281  n. 

Charity,  solidarism  distinguished  from, 
614  n. 

Charlety,  S.,  226  n. 

Charmont,  M.,  607  n. 

Charter  of  1814,  205 

Chartist  movement,  the,  235 

Chatelain,  M.,  60  n.,  369  n.,  415  n.,  427  n. 

Cherbuliez,  A.  &,  376,  541  n. 

Chevalier,  M.,  212,  213,  226,  289  n.,  366, 
375,  411-412,  444 

Child,  Sir  J.,  54 

Chrematistic  school,  178-179 

Christian  Social  Union,  506  n. 

Christian  Socialism  (Social  Protestantism), 
xv,  378,  495,  503-509  ;  origin  of  the 
movement,  503-504  ;  and  association, 
504-506  ;  and  moral  reform,  505,  509 ; 
and  private  property,  506  ;  the  move- 
ment in  America,  506  ;  in  Germany  and 
in  Switzerland,  507  ;  in  France,  508  ; 
and  solidarity,  508  ;  and  individualism, 
509 

Christian  Socialists,  111,  196,  370,  483 ; 
and  socialism,  483-485 ;  and  Classical 
Liberalism,  484 ;  and  the  "  naturaj 


652 


INDEX 


Christian  Socialists — Conti 

order,"  484  ;  and  Marx's  collectivism, 
485  ;  and  State  Socialism,  485  ;  their 
doctrines,  and  their  influence,  486  ;  and 
economic  theory,  515 

Christianity,  economic  doctrines  inspired 
by,  483-514 

Christliche  Gewerkvereine,  501 

Civitas  Solis,  246 

Clark,  J.  B.,  522  n.,  527, 542  n.,  552,  564  ». 

55  Class  war,"  465  n.,  471,  478,  479,  481- 
482 

Classical  school,  doctrine  of,  XT;  the 
Physiocratic  doctrine  and,  10 ;  Last 

•  and,  169  ;  and  the  critical  school,  170  ; 
Sismondi  and,  174,  177,  179,  195-196  ; 
and  machinery,  180,  182  ;  and  over- 
production, 181 ;  resemblance  oi  doc- 
trines of,  to  those  of  Marx,  181  ;  and 
competition,  182 ;  and  the  be ne licence  of 
the  spontaneous  economic  forces,  230  ; 
and  Free  Trade,  264 ;  List  and,  289, 290; 
severance  of,  into  English  and  French 
schools,  322 ;  apogee  and  decline  of, 
348-376  ;  Senior  and,  349-350  ;  spread 
of  the  doctrines  of,  351-352  ;  Stuart 
Mill  and,  352,  353,  354,  368,  374 ;  and 
natural  laws,  354-366;  called  the 
Individualist  school,  355 ;  and  in- 
dividualism, 355-356 ;  and  liberty, 
356 ;  definition  of,  356  n.,  357  n.  ; 
and  laissez-faire,  357 ;  and  inter- 
national exchange,  363  ;  doctrines  of, 
in  the  middle  of  the  nineteenth 
century,  366-367 ;  and  peasant  pro- 
prietorship, 371  n. ;  decline  of  the 
Classical  doctrine,  378 ;  Koscher  and 
flildebrand  and,  383-385  ;  Knies  and, 
384 ;  the  Historical  school's  criti- 
cism of,  385,  389-398,  517  ;  and  self- 
interest,  393-394  ;  and  the  deductive 
method,  395-396;  407;  Hermann 
and,  410-411 ;  and  distribution,  422  ; 
State  Socialism  and,  438 ;  and 
Marxism,  467,  472  ;  Carlyle  and,  511 ; 
the  Hedonists  and,  518-521, 539, 541  n., 
544 ;  and  rent,  520,  547  ;  and  price, 
520;  and  value,  530  ».,  558 

Clavieres,  £,  107 

Cobden,  R.,  280,  323,  328  ».,  360,  366, 
375 

Colbert,  J.  B.,  11  n.,  280 

Colbertian  system,  Physiocracy  antago- 
nistic to,  29 ;  and  agriculture  and 
industry,  30  n. ;  97,  178 

Colins,  Baron,  155,  560 

Collectivism,  xv  ;  the  Saint-Simonians 
and,  201,  202,  211,  218-221,  231  ;  of 
Marx,  250,  459  n.,  485 ;  development 
of,  378 ;  origin  of  the  term,  459  n.  •, 
and  property,  464  and  n. ;  and 
Christian  Socialism,  509  ;  the  working- 
class  ideal,  516,  579  ;  the  Fabian,  581  ^ 
Kropotkin  and,  627 


Collinsists,  465  n. 

Colson,  L.  C.,  342  n.,  427  n.,  537  ». 

Combination  Laws,  361 

Commerce,  regarded  as  unproductive  by 
the  Physiocrats,  13 

Communism,  Sismondi  and,  194 ;  Marx 
and,  221,  459  n.,  464;  Cabet  and,  264 ; 
Proudhon  and,  298,  300  ;  Bastiat  and, 
337 ;  Stuart  Mill  and,  353,  367  ; 
Buskin  and,  513  ;  Tolstoy  and,  613  ; 
Kropotkin  and,  627 

Communists,  the,  Proudhon  and,  296 
and  n. 

Competition,  Sismondi  and,  182-184, 186, 
193  n.,  198 ;  Adam  Smith  and,  182 ; 
the  Associationists  and,  233-234 ; 
Robert  Owen  and,  240  ;  Blanc  and, 
256-257,  260;  Ollivier  on,  325;  Stuart 
Mill  on,  353,  358 ;  free,  the  Classical 
school  and,  358,  544;  Cairnes  and, 
375;  the  State  Socialists  and,  440; 
F.  D.  Maurice  and,  504  n. ;  free, 
the  Hedonists  and,  518,  541-542, 
605  n. ;  free,  Walras  and,  541-542; 
543 

Composite  rent,  652 

Comptabilisme  sociaie,  242 

Comte,  A.,  36  n.,  201  n.,  203  and  n.,  211 ; 
and  Saint-Simon,  222 ;  and  the 
spontaneity  of  the  "  natural  order," 
331 ;  335,  352,  367,  374  n.;  and  the 
Historical  method,  404-405;  and  the 
equality  of  men,  486  n.  •  and  solidarity, 
589,  601  n. ;  and  the  sociological 
analogy,  590  n. ;  595 

Comte,  C.,  207 

Condc-sur-Vesgres,  Fourier  colony  at, 
255  n 

Condillao,  £  B.  de,  xiii,  46, 47, 48-60,  74, 
75,  109  and  n.,  117,  118  n.,  523  n. 

Condorcet,  M.  C.,  122,  224 

Confederation  general  du  Travail,  480, 
502,640 

Congress  of  Catholic  Circles,  498  n. 

Considerant,  V.,  234  n.,  255,  264,  296  n., 
301,  303,  304,  599,  607  n. 

Consumer,  Bastiat  and  the  subordination 
of  producer  to,  342-343 

Consumer's  rent,  527  n. 

Consumers  and  social  reorganisation, 
605  n. 

Consumption,  the  Psychological  school 
and,  526-52  7;  the  Mathematical  school 
and,  630 

Continental  Blockade,  the,  266,  279 

Cooper,  W.,  244 

Co-operation,  Fourier  and  Owen  and, 
234,  257  ;  in  Fourier's  Phalanstere, 
246-252,  257;  Blanc  and,  257-263, 
306;  Buchez  and,  258  ;  Proudhon  and, 
315  ;  Stuart  Mill  and,  353,  370  ;  the 
Social  Catholics  and,  496-500  ;  F.  D. 
Maurice  and,  504  n. ;  the  Chris, 
tian  Jbocialisto  and,  505,  506 ;  Tomy 


INDEX 


653 


Fallot  and,  508  n. ;  solidarity  and, 
588,  604  ;  the  iScole  de  Nimes  and, 
605  n. ;  co-operators  and  capital,  605  n. 

Co-operative  societies,  beginnings  of, 
243;  Robert  Owen  and,  243-244, 
504  ;  character  of,  250  n.,  504-505 

Co-partnership,  251  n. 

Corn,  high  price  of,  in  England,  in  the 
earljr  nineteenth  century,  145-146 

Corn  Laws,  English,  Sismondi  and,  175 ; 
269,  277,  280,  354,  361,  366 

Corporative  associations,  the  Social 
Catholics  and,  496-500,  501  and  n. 

Cossa,  L.,  ri,  367,  376 

Cost  of  production  theory,  Adam 
Smith's,  78-79,  80 

Courcelle-Seneuil,  J.  G.,  118  n.,  316  n., 
317  n.,  375,  641  n. 

Cournot,  A.,  r,  265  n.,  349,  360  n.,  412- 
413,420  n./444,  519, 520, 529  n.,  531  nn. 

Coux,  de,  483  n. 

Credit,  Enfantin  on,  213  n.,  226  n. ;  the 
Saint-Simonians  and,  226;  Proudhon 
and,  313  n.,  314 

Cremieux,  H.  J.,  303 

Crises,  J.  B.  Say  and,  115-117;  in- 
dustrial, in  England,  172 ;  Sismondi 
and,  173,  190-192,  426  ;  Robert  Owen 
and,  239 ;  Rodbertus  and,  426 ; 
Mane  and,  462-463,  478-479 ;  Henry 
George  and,  566 

Croce,  B.,  474  n. 

Crompton,  S.,  65 

Cunningham,  W.,  Y,  vi,  387 

Curmond,  M.,  13  n. 

DARTMON,  A.,  316  n. 

Darwin,  Charles,  his  debt  to  Malthas, 
121  ;  the  French  Liberal  school  and 
his  doctrine  of  the  survival  of  the 
fittest,  326  ;  Kidd  and  the  Darwinian 
theory,  485  n. ;  Kropotkin  and,  621 

Dechesne,  M.,  498  n. 

Declaration  of  the  Rights  of  Man,  233 

Deductive  method,  the,  387,  395-398 

Deherme,  G.,  587  n. 

Demand  and  supply,  Adam  Smith  and, 
73-74,  80-85,  89  ;  the  law  of,  of  the 
Classical  school,  359-360  ;  the  Hedon- 
ists and, 519-520 

Demand,  price  and,  519-520 

Demography,  121,  645 

Demolins,  E.,  494  and  n.,  495,  608  n. 

Denis,  Professor  H.,  ri ;  on  Physio- 
cracy,  2  n.,  8  n. ;  on  the  Tableau 
tconomiquf,  19  and  n. ;  140  n.,  141  n., 
164  n.,  184  n.,  404 

Denis,  M.,  242  n. 

Descartes,  629 

Deschamps,  M.,  x  n.,  xi  n. 

Despotism,  the  Physiocrats  and,  36-37 

Destutt  d&  Tracy.  118  n. 

Dictionnaire  d1  Economic  polilique,  354, 
353 


Diehl,  K.,  317  n. 

Differential  rents,  546-558 

Discount,  in  Proudhon's  Exchange  Rank 
scheme,  310  n.,  313  ;  normal,  312 

Distribution,  the  Physiocrats  and,  18, 
21,  113,  114;  Adam  Smith  and,  55, 
80,  93,  113,  114,  228;  J.  B.  Say  and, 
93,  113-114,  228;  Ricardo  and,  114, 
139-140,  162-163,  228  ;  Sismondi  and, 
177-178,  185,  186,  198;  the  Saint- 
Simonians  and,  229 ;  Fourier  and,  245 ; 
Vidal  and,  259  ;  Stuart  Mill  and,  368, 
369;  Rodbertus  and,  421-429,  430- 
431  ;  State  Socialism  and,  443-444  ; 
the  Hedonists  and,  527,  529-530,  541  ; 
Henry  George  and,  565  n.-566  n.  • 
Mr.  and  Mrs.  Webb  and,  683;  the 
anarchists  and,  636  ;  development  of 
the  theory,  645 

Distributive  societies,  604 

Dolleans,  E".,  236  n.,  239  n.,  244  n, 

Dollfus,  J.  H.,  490 

Doubleday,  T.,  137  n. 

Dove,  P.  E.,  560  and  n. 

Dragomanov,  M.  P.,  619  ». 

Dr6me,  M.  de  la,  303 

Droz,  N.,  197  and  n. 

Drysdale,  Dr.,  134  n. 

Dubois,  J.  B.,  ri 

Duguit,  L.,  607  n. 

Duhring,  E.,  117,  208  n.,  289  n.,  420  «. 

Dumas,  G.,  202  n. 

Dumont,  M.,  137 

Dumoulin,  C.,  503  n. 

Dumping,  275 

Dunoyer,  C.,  207, 325  n.,  326  n.,  327,346- 
348  and  n.,  363,439,  614-616,  631  n. 

Dupin,  C.,  277 

Dupont  de  Nemours,  P.  8.,  on  Q.uesnay's 
"rural  economy,"  2;  as  a  member  of 
the  Physiocratic  school.  3  n.-4  n. ; 
originator  of  the  term  "  Physiocracy," 
4  n. ;  his  definition  of  Physiocracy,  5  ; 
on  natural  society,  6  n. ;  on  the 
"  natural  order,"  7  n.,  8  n.,  9  n. ; 
on  the  "  net  product,"  12  n. ;  on  the 
productive  and  non-productive  classes, 
14  n. ;  on  the  need  for  the  security  of 
property,  24  n. ;  on  representation  in 
the  State,  and  on  the  parliamentary 
regime,  34  n. ;  on  despotism,  35  n. ; 
on  the  duty  of  the  sovereign,  37  ;  on 
taxation,  38  n.,  40  n. ;  on  the  land- 
owner, 39  and  n. ;  on  the  relation  of 
expenditure  to  production,  41n.~42n. ; 
on  regulating  national  expenditure, 
44  n. ;  on  the  amount  of  the  tax,  44 
n. ;  and  "  proportionality,"  45  n. ;  on 
natural  law,  354  n. 

Dupont- White,  C.  ,  221,  304  ;  on  the 
State,  408  n.,  409,  440,  441  ;  on  the 
State  and  the  individual,  440 ;  and 
individualism,  443  n. ;  and  distribu- 
tion, 443-444 


654 


INDEX 


Dupuit,  A.  J.,  521  n.,  531  n. 

Durand  Union,  606  n. 

Durkheim,  E.,  61,  388  n. ;  and  solidarity, 

599-600 
Duverger,  213 


EAST  INDIA  COMPANY,  96 

ficole  de  Nimes,  605  n. 

"  Economic  chivalry,"  335 

Economic  equilibrium,  theory  of,  474, 
521  n.,  555  n.,  558  n. 

Economic  forces,  Proudhon  and,  296- 
297,  315 

"  Economic  law,"  69,  70 

Economic  liberty,  Adam  Smith  and, 
93-98  ;  the  consummation  of,  326-327 

"  Economic  rent,"  582  n.,  583  n. 

Economics,  Senior  and,  349-350 ;  Stuart 
Mill's  influence  upon,  367  ;  theory  of 
the  universality  of  the  laws  of,  390  ; 
relativity  of  the  laws  of,  390-395  ;  the 
deductive  method  in,  395-398  ;  the 
Historical  school  and,  398-407 ;  the 
varied  scope  of,  399  ;  environment  a 
principal  factor  in,  400  ;  the  place  of 
history  in,  400-407 ;  and  statistics, 
407  n. ;  as  a  science,  543  n.,  644  ;  the 
separation  between  pure  and  descrip- 
tive, 645 

Economics,  pure,  392-393,  515,  517,  541 
and  n.,  645 

Economie  soeiale,  178 

"  Economistes,"  4  n. 

Eden,  Lord,  105  n. 

Eden,  Treaty  of,  105,  269 

Edgeworth,  Maria,  119  n. 

Edgeworth,  Professor,  529  n.,  536  n. 

Education,  Adam  Smith  on  compulsory, 
60,  96 ;  Robert  Owen  and,  238  n. ; 
Fourier  and,  253 

Effertz,  0.,  420  n. 

Eheberg,  K.  T,  266  n. 

Eichthal,  G.  d',  374,  594  n. 

Einaudi,  L.,  546  n,,  567 

Eisenach,  Congress  of,  354,  417,  436, 
437  438 

Eltzbacher,  P.,  621  n.,  625  n.,  638  n. 

Ely,  R.  T.,  351  n.,  507  n. 

Enclosure  Acts,  in  England,  145 

Enfantin,  B.  P.,  201  n.,  203  n,,  211, 
212  and  n.,  213,  216  n.,  226  and  n., 
229,  230  n.,  231 

Engels,  F.,  208  n.,  209,  228,  449  n., 
450  n.,  464  n.,  616 

Ensor,  R.  C.,  449  n. 

Entrepreneur,  the,  J.  B.  Say  and,  65  n., 
113-114 ;  Sismondi  and,  183 ;  theSaint- 
Simonians  and,  215,  216;  French  and 
English  economists'  conception  of  the 
income  of,  373  n.,  550 ;  and  production, 
426 ;  in  Walras's  system,  533-534 ; 
and  Walker's  conception  of  profit,  550 ; 


distinguished  from  the  capitalist,  550 
and  n.;  a  "  captain  of  industry,"  550 

Environment,  Robert  Owen  and,  238, 
239  ;  Fourier  and,  247  ;  the  Associa- 
tionists  and,  259  ;  Le  Play  and,  494 

Equalitarians,  200 

Equilibrium,  the  Mathematical  school 
and,  533-536,  539 

Erfurt,  Congress  of,  507 

"  Ergonomy,"  375 

Escarra,  IS  ,  560  n.,  577  nn. 

Esmein,  A.,  34  n.,  35  n. 

Espinas,  A.,  xi 

Etiology,  Robert  Owen  regarded  as  the 
father  of,  238 

Evolution,  and  solidarity,  609 

Exchange,  the  Physiocratio  view  of,  27, 
46,  49,  114  ;  Condillac  on,  50  ;  Proud- 
hon and,  299-300,  309-314  ;  Dunoyer 
and,  348  ;  Marx  and,  450  ;  the  final 
utility  theory  and,  523-524,  525,  526 ; 
the  Mathematical  school  and,  528-530  ; 
and  solidarity,  607,  613-614;  and 
association,  613  n. 

Exchange  Bank,  Proudhon's,  242,  243, 
291,  293  n.,  308-320,  334  n.,  627 

Exchange  banks,  316 

Exchange  notes,  Proudhon's,  309-314, 
316,  317  n. 

Exchange  value,  profit  dependent  on,  90 

"  Exploitation,"  the  Saint-Simonians  and, 
214,215,  216;  Sismondi  and,  215,216  ; 
Marx  and,  215,  216 ;  Bakunin  and, 
626  ;  Kropotkin  and,  627  n. 


FABIAN  socialists,  221,  465  n.,  475,  579- 

587 

Fabian  Society,  vii,  579-581 
Fable  of  the  Bees,  The,  54,  70  n. 
Factory   legislation,    beginnings    of,    in 

England,  171  ;  Act  of  1819,  171,  237 
Faguet,  M.,  251  n. 

Fallot,  Pastor  Tomy,  508  and  n.,  509 
Familistere,  255 
Faucher,  J.,  616 
February  Revolution — see  Revolution  of 

1848 

Ferrara,  F.,  333  n. 
Ferrier,  F.,  278  n. 
Festy,  0.,  258  n. 
Fetter,  Professor  F.  A.,  522  n. 
Feuerbach,  L.  A.,  616,  623  n. 
Fichte,  J.  G.,  435-436  n. 
Final  utility  theory,  474,  521-528,  539, 

583 

Finance,  the  science  of,  645 
Fiscal  reform,  and  solidarity,  602 
Fisher,  Irving,  71  n.,  522  n..  529  n.,  541  n., 

583 

Fix,  T.,  197 
Fleurant,  M.,  594  n. 
Fontenay,  R.  de,  146  n.,  156,  338  *. 
Fouillee,  A.,  560,  600  n.,  606 


INDEX 


655 


Fourier,  C.,  137  n.,  169,  194  ;  and  the 
Saint- Simonians,  201  n. ;  231 ;  on  asso- 
ciation, 232  n. ;  233  ;  and  Robert 
Owen,  234-235,  245;  his  work  and 
ideas,  245-246  ;  his  Phalanstere,  246- 
251,  257  ;  "  Back  to  the  land,"  251- 
252  ;  and  the  attractiveness  of  labour, 
252-253;  and  education,  253;  and 
the  sex  question,  253-254  ;  and  anti- 
militarism,  254 ;  his  influence  and 
following,  254-255;  Stuart  Mill  on 
Fourierism,  255 ;  and  interest,  259 ; 
261,  264;  and  Free  Trade,  265  n. ; 
290  ;  Proudhon  and,  296,  297  n. ;  300  ; 
and  "  the  right  to  work,"  301  ;  323, 
378,  465,  470,  486,  544,  589;  and 
guarantism,  599,  604 ;  claimed  as  an 
anarchist,  615 

Fourniere,  E.,  465  n.,  469  n. 

Foville,  M.  de,  156  nn. 

Foxwell,  Professor,  231  n.,  244  n.,  316  n., 
607  n. 

France,  population  in,  125,  136  n.,  137  ; 
economic  unity  of,  achieved,  266  ;  and 
tariffs,  269,  280  ;  List  on  Protection 
and,  276  n. ;  the  classic  land  of 
socialism,  323  ;  Protection  in,  323  ; 
the  Classical  doctrines  in,  352  ;  Stuart 
Mill  on  the  growth  of  population  in, 
399 ;  Christian  Socialism  in,  508 ; 
anarchism  and,  640 

Frankfort,  268  n. 

Franklin,  B.,  329  ;   Bastiat  and,  329  n. 

Free  contract,  the  anarchists  and,  627- 
628 

"  Free  credit,"  307,  319,  320 

Free  Trade,  the  Physiocrats  and,  17,  29- 
31,  98,  153 ;  the  Physiocrats  the 
founders  of,  29  ;  Adam  Smith  and,  98- 
102,  153  ;  J.  B.  Say  and,  115  ;  Ricardo 
and,  153,  154,  163  ;  the  theory  in  the 
middle  of  the  nineteenth  century,  264- 
265 ;  Fourier  and,  266  n.  •  Cournot 
and,  265  n.  •  and  agriculture,  List  on, 
276 ;  Carey  and,  282-283 ;  List  and, 
287-288;  298;  follows  the  interest 
of  the  consumer,  343  ;  Dunoyer  and, 
347  ;  Stuart  Mill  and,  365,411  n.  .and 
the  Corn  Laws,  366  ;  Prince  Smith  and, 
376 

Tree  utility  theory,  Bastiat'a,  335-340 

Frezouls,  P.,  547  n.,  554  n. 

Froebel,  F.,  a  disciple  of  Fourier,  253 


GALIAKI,  the  Abb4,  h!«  criticism  of  the 
Physiocratio  doctrine,  32  ;  46,  47 

Garantismr.,  Fourier's,  254.  See  Guarant- 
ism 

Qaroon,  M.,  44  n. 

Garden  cities,  251,  613 

Gamier,  G.t  103, 108, 108, 115,295,  379  n. 

Gamier,  J.,  379 

Gendre,  7.  Le,  11 ». 


George,  Henry,  and  the  Physiocrats, 
45  n.;  and  rent,  141,  565-568,  575; 
and  land  nationalisation,  141,  155, 
577  n. ;  376,  465  n.,  506 ;  and  man's 
right  to  the  land,  561 ;  his  career  and 
his  works,  563-564;  569,  573;  and 
laissez-faire,  573  n. 

Germany,  political  and  economic  condi- 
tion of,  in  the  nineteenth  century,  265, 
266  ;  tariffs  in,  266,  280,  281  ;  the 
movement  for  economic  unity  in,  267- 
268  ;  List  and  the  claim  of,  to  Holland 
and  Denmark,  272  ;  the  English  Corn 
Laws  and,  276-277  ;  and  Protection, 
281  n.,  289  ;  the  Classical  doctrines  in, 
352;  State  Socialism  in,  445-446; 
Christian  Socialism  in,  607 

Gervinus,  G.  G.,  383  n. 

Gibbon,  E.,  105 

Gide,  C.,  245  n.,  246  n.,  334  n.,  342  n., 
522  n.,  576  n.,  592  n.,  605  n. 

Godin,  A.,  255 

Godwin,  Wm.,  122,  131,  136  n.,  200  and 
n.,  679,  615 

Goehre,  Pastor,  507 

Goethe,  400 

"  Good  price  " — tee  Bon  prix 

Gossen,  H.  H.,  155,  349,  474  n.,  522  n., 
529  n. ;  and  land  nationalisation,  571- 
577  ;  and  the  confiscation  of  rent,  574- 
575 

Gounelle,  E.,  506  n.,  508  nn..  509 

Gournay,  V.  de,  4  n. ;  and  the  origin  of 
the  term  laissez-faire,  11  n. 

Gouth,  Pastor,  608 

Government,  in  Saint-Simon's  system, 
207-209  ;  Adam  Smith  on,  217,  625  ; 
Proudhon  and,  310-311,  624  n. ; 
Chevalier  and,  412  ;  the  State  Social- 
ists and,  439-440,  441  ;  the  anarchists 
and,  624-627  ;  and  society,  631  ;  and 
the  social  instinct,  632 

Grand,  G.,  482  n. 

Grave,  J.,  615,  619  n.,  622,  626  n.,  628, 
629,  630,  631  n.,  633  n.,  634,  635  n., 
636  n. 

Great  Britain,  growth  of  wealth  and 
population  in,  131 

Grim,  K.,  298  n,,  323  ». 

Guarantism,  599,  604.     See  Oarantisme 

Gneade,  J.,  453  n.,  465  n. 

GniL'anme,  J.,  459  n.,  619  n.,  631  n. 

Guillanmin,  U.  G.,  295 

Gustavus  111,  of  Sweden,  and  the  Physio- 
crats, 5 

Guyau,  J.  M.,  598  n. 

Guyot,  Y.,  343  n.,  358  n.,  608  n. 

HALftvT,  £.,  104  n.,  119  n,,  HI  n.,  207  n* 

230  n. 

Hall,  0.,  579 
Hamilton,  A.,  277 
Hanover,  268  n. 
Hardie,  J.  Keir,  606 


656 


INDEX 


Hargreaves,  J.,  65 

Harmel,  L.,  499  n. 

Harmony,  Bastiat's  doctrine  of,  330- 
346 

Harmony,  Fourier's  ideal  city,  249  and  n., 
254 

Hasbach,  W.,  69  n. 

Hawthorne,  N.,  255  n. 

Hedonism,  xv,  10 ;  Adam  Smith's 
Optimism  distinct  from  that  of,  93 ; 
355  ;  Ruskin  and  Tolstoy  and,  510  ; 
definition  of,  518 

Hedonistic  school,  and  free  competition, 
91,  240,  373  n.,  518,  543,  605  n. ;  335, 
395,  407  ;  its  doctrines,  518-544 ;  and 
the  Classical  school,  518-521,  539, 
541  n.,  544  ;  and  wages,  520-521,  541  ; 
and  interest  and  rent,  520-521 ;  France 
and,  529,  537 ;  criticism  of  its  doc- 
trines, 537-544  ;  and  distribution,  541 

Heeren,  A.  H.  L.,  383  n. 

Hegel.  435  and  n..  619 

"  Hegelian  school,  left,"  616  n. 

Hegelian  terminology,  Proudhon  and, 
298  n. 

Held,  A.,  386 

Heredity,  and  solidarity,  588 

Hermann,  F.,  410-411, 548  n.,  551,  556 

Herron,  G.  D.,  507  n. 

Hesse-Darmstadt,  Tariff  Union  between 
Prussia  and,  268 

Higgs,  H.,  5  n. 

Hildebrand,  Bruno,  196,  271  n.,  380  n., 
381  n.,  383-384,  385,  389  and  n.,  390, 
394.  400  and  n.,  404,  405 

Hirst,  Miss  M.  E.,  275  n.,  277  n., 
278  nn. 

Historical  school,  vi-vii,  xv,  111 ;  and 
political  economy,  175,  222  ;  Sismondi 
and,  196;  List  and,  287;  368,  374, 
377  ;  origin  and  development  of,  379, 
380-388  ;  the  newer  school,  385-386  ; 
influence  of,  in  England,  and  in 
France,  387-388 ;  critical  ideas  of, 
388-398  ;  the  positive  ideas  of,  398- 
407  ;  A.  Comte  and,  404-405  ;  and  Le 
Play's  school,  493-494 ;  and  economic 
theory,  515  ;  and  the  Classical  school, 
517;  648 

History,  the  consideration  of  economic 
reforms  based  upon,  221,  222  ;  the 
philosophy  of,  in  economics,  221,  224  ; 
the  place  of,  in  economics-  400-403 

Hitze,  the  Abbe,  496 

Hobbes,  T.,  630 

Holyoake,  G.  J.,  244  n. 

Homo  ceconomicus,  Adam  Smith  and,  86  ; 
399  ;  Carlyle  and,  511  ;  the  Hedonists 
and,  618,  543 

Howarth,  C.,  244 

Huet,  F.,  495.  560 

Hughes,  T.,  504 

Humanity,  in  the  anarchist  doctrine, 
623 


Hume,  David,  Adam  Smith  and,  50  «., 
53,  64  n.,  105, 106,  273  n. ;  and  money, 
85;  120  n.,  149 n..  165 

Huskisson,  W.,  265,  267 

Hutcheson,  F.,  50  n.,  53 

Hyndman,  H.  M.,  579  n. 


IBSEN,  H.,  511 

Icaria,  Cabet's  ideal  State.  246,  263, 
264  n. 

Identity  of  interests,  Adam  Smith  and, 
185,  410  ;  Sismondi  and,  185-186,  410, 
413  ;  Malthus  and  Bicardo  and,  410  ; 
Hermann  and,  410-411 ;  Stuart  Mill 
and,  411 ;  Cournot  and,  413 

Immortale  Dei,  Encyclical,  501 

ImpSt  unique,  45,  61,  567 

Indirect  and  direct  taxation,  the  Physio- 
crats and,  44-45 

Individual,  the  State  and,  442-443 ; 
Walras  on  the  State  and,  573-574; 
in  philosophical  anarchism,  615 ; 
Stirner  and  the  cult  of  the,  617-619, 
622-623  ;  Proudhon  and  the  anarchists 
and,  622-623,  630  ;  and  society,  the 
anarchists  and,  629-631 ;  Bakunin 
on,  630,  631  n. ;  Jean  Grave  and, 
631  n. 

Individualism,  xi,  263;  List  and,*  270; 
the  Classical  school  and,  322,  355, 
356;  Bastiat  and,  330;  Stuart  Mill 
and,  355,  356  and  n. ;  Ricardo  and 
Malthus  and,  355 ;  Herbert  Spencer 
and,  356  ;  and  solidarity,  356  n.  •  and 
liberty,  356 ;  the  Liberal  school  and, 
357  n. ;  Dupont- White  and,  443  n. ; 
Wagner  and,  443  n. ;  Christian  Social- 
ism and,  509  ;  modern  development  of, 
516  ;  anarchism  and,  640,  642  ;  syndi- 
calism and,  642 

Individualist  school,  355  ;  known  also  as 
the  Liberal  school,  356  ;  definition  of, 
356  n. ;  and  inheritance,  372  n. 

Individuality,  solidarity  and,  612-613 

Induction,  395,  397-398 

Industrial  and  Provident  Societies  Acts 
of  1852-62,  505 

Industrial  Revolution,  65,  104,  111 

Industrialism,  of  Saint-Simon,  202-211, 
224  ;  Fourier  and,  251 

Industry,  regarded  as  sterile  by  the 
Physiocrats,  13  ;  the  inherent  distinc- 
tion between  agriculture  and,  17-18 ; 
the  Physiocrats'  erroneous  view  of,  46  ; 
Sismondi  and,  194  ;  Saint-Simon  and, 
204,  205  and  n..  206 ;  List  and,  274, 
286,  287 

Ingersoll,  C.,  278 

Ingram,  J.  K.,  v,  xi,  385  n.,  404 

Inheritance,  the  Saint-Simonians  and 
217-218,  223,  224;  the  State  to  be 
sole  inheritor  of  property,  223  ;  the 
French  Revolution  and,  223 :  the 


INDEX 


657 


Phalanstere  and,  246 ;  Dunoyer  and, 
347  n. ;  Senior  and.  351  and  n.,  372  ; 
Stuart  Mill  and,  372 

Institutional  Church,  506 

Interest,  the  Physiocrats  and,  32-33 ; 
Condillac  and,  50  ;  Adam  Smith  and, 
65  n.,  02,  96  ;  Bentham  and,  96  n. ; 
Sismondi  and,  176  n.,  192-193  n. ;  Marx 
and,  181-185;  (he  Saint-Simoniaos 
and,  213  n.,  214  ;  downward  trend  of 
the  rate  of,  223 ;  Robert  Owen  and, 
240  n. ;  Blano  and,  259-260  ;  Fourier 
and,  259  ;  Proud  ho  n's  Exchange  Bank 
and,  298  n.,  308-310,  312,  313,  314, 
319;  Solway's  scheme  and,  319;  the 
People's  Bank  and,  319  ;  Bastiat  and 
Proudhon's  controversy  aa  to  the  legi- 
timacy of,  333  n.-334  n. ;  Bastiat  and, 
340-342 ;  Senior  and,  350  ;  the  term  as 
used  by  the  French  economists,  373  n. ; 
final  utility  and,  528;  Bohm-Bawerk 
and,  530,  540 ;  and  wages,  Henry 
George  on,  565 ;  the  proposed  con- 
fiscation of,  568  ;  "  the  remuneration 
of  sacrifice,"  568 ;  the  Fabian  school 
and  the  confiscation  of,  582 

Interests,  the  spontaneous  harmony  of, 
633.  See  Identity  of  Interests 

International  trade,  Adam  Smith  and, 
98-100;  Stuart  Mill  and,  98-100; 
Ricardo  and,  98,  138,  163,  363  and  n.~ 
364  and  n. ;  List  and,  290  ;  Bastiat  and, 
330  ;  Dunoyer  and,  363 

International  Working  Men's  Association 
(the  "International"),  321  449  n., 
620 

Internationalism,  Marx's,  465  n. 

Interventionism,  407 

Interventionists,  Sismondi  the  first  of  the, 
192,  196 ;  601 

Ireland,  104 

!'  Iron  law,"  the,  42,  342  n. 

Italy,  zii ;  anarchism  and,  640 


JANBT,  P.,  254 

Jannet,  C.,  490  n.,  592  «. 

Jaures,  J.,  469  n. 

"  Jeunes  Abbes,  Les,"  502 

Jevons,  Stanley,  46  n.,  48,  75,  78,  117  ; 
on  the  Ricardian  school,  118  n. ;  and 
the  law  of  indifference,  148,  525  n.  ;  his 
economic  method,  380  ;  406,  474  n. ; 
on  the  purpose  of  economics,  518  n. ; 
and  the  final  utility  theory,  521  n., 
522  n. ;  and  Cournot,  529  n. ;  a 
member  of  tho  Mathematical  school, 
629  n. ;  and  value,  530  n. ;  537  n.,  541, 
572  n.,  581 

Joint- stock  companies,  Marxism  and, 
463,  476 

Joint-stock  principle,  248 

Joseph  II,  Emperor  of  Austria,  and  the 
Physiocrats,  5 


"  Juridical  socialism,"  606,  607  n. 
Jurisprudence,  solidarity  and,  606-607 
Justice,  Proudhon  on,  298-299 

Kapital,  Marx's,  354,  386,  449  n. ; 
Labriola  on,  467 

Kautsky,  K.,  480  n. 

Kotteler,  Monseigneur  von,  496 

Kidd,  B.,  485  n. 

King,  G.,  54 

ivingsley,  C.,  504  and  n.,  505  n. 

Knies,  K.,  89,  196  and  n.,  380  n.,  381  n., 
382  n.,  384-385,  389,  390-391,  392, 
393,  400  n.,  402,  403  n.,  404,  405 

Kohler,  C.,  277  n. 

Kraus,  Professor,  106  n. 

Kropotkin,  Prince,  459  n.,  616,  616,  619 
and  n.,  621-622,  623,  625,  627  and  n., 
628,  630,  631  n.,  632,  633,  634  and  n., 
635,  636,  637-638,  641 

Kurella,  Heir,  584  n. 

Kutter,  Pastor,  507 

LABOUR,  regarded  by  Adam  Smith  as  the 
true  source  of  wealth,  56-57 ;  regarded 
as  the  measure  of  value,  77,  149 ;  re- 
garded by  Marx  as  the  cause  of  value, 
77,  151  n.,  184-185;  regarded  by 
Ricardo  as  the  cause  and  measure  of 
value,  140,  144  n.,  149,  201  n.,  332  ; 
Ricardo  and  the  territorial  division  of, 
164 ;  Sismondi  and,  176  n. ;  Saint- 
•  Simon  on,  206  n. ;  Fourier  and  the 
attractiveness  of,  252-253  ;  Proudhon 
on  the  organisation  of,  291  n.  •  Proud- 
hon and  the  productiveness  of,  293 
and  nn. ;  regarded  by  Bastiat  as  the 
determinant  of  value,  332 ;  Carey  on, 
aa  the  measure  of  value,  332 ;  and 
value,  Ferrara  and,  333  n. ;  Dunoyer 
on,  347-348  and  n. ;  Rodbertus  and, 
423  ;  Marx's  theory  of  surplus  labour, 
450-459;  rent  of,  558  n. ;  Henry 
George  and  the  relation  of  capital 
to,  564-565 

Labour,  division  of,  Adam  Smith  and, 
56-62,  91 ;  the  outcome  of  personal 
interest,  70-71  ;  dependent  upon 
capital,  90 ;  Ricardo  and  the  terri- 
torial division  of  labour,  164  ;  Tolstoy 
and,  514  ;  solidarity  and,  607 

Labour  notes,  Robert  Owen's,  315,  316 

Labour-value  theory,  Marx's,  474-475, 
581 

Labriola,  A.,  36  n.,  449  n.,  462n.,  464  n., 
465  and  n.,  467,  469  n.,  470  n.,  473  n., 
474  n. 

Lacordairo,  J.,  262 

Lafargue,  P.,  465  n. 

Lafayette,  G.,  267 

Lagardelle,  H  ,  482  n.,  619  n. 

Lataaez-faire,  in  the  Physiocratio  doctrine, 
11  ;  the  origin  of  the  formula,  11  n. ; 
170,  173,  197;  Lost  and,  277;  tht 


658 


INDEX 


Lerissez-faire — continued 

Classical  school  and,  322, 357,  390 ;  the 
right  interpretation  of,  324 ;  Stuart 
Mill  and,  357 ;  Cairnes  and,  374 ;  the 
Christian  schools  and,  377 ;  the  His- 
torical school  and,  389  ;  Adam  Smith 
and,  408,  410  ;  Carlyle  and,  511  ;  the 
Hedonists  and,  541  ;  Henry  George  and 
573  n. 

Lalande,  A.,  600  n. 

Lamartine,  A.,  302  n.,  303 

Lammenais,  the  Abbe  de,  496 

Land,  the  Physiocratic  conception  of, 
as  an  agent  in  production,  12  ;  and 
rent,  in  Ricardo's  view,  143-149 ; 
nationalisation  of,  155,  570-578  ;  the 
Saint-Simonians  and,  214 ;  Carey's 
theory  of  the  order  of  cultivation  of 
rich  and  poor  land,  338-339 ;  growth 
in  value  of,  546  ;  a  gift  of  nature,  559  ; 
confiscation  of,  559-562 ;  and  the 
theory  of  rent,  561 

Land  Tenure  Reform  Association,  562 

Landez,  A.,  540  n. 

Landowners,  the  Physiocrats'  esteem  for, 
39-40 

Landrecht,  the  Prussian,  445 

Landry,  A.,  420  n.,  470  n.,  537  ».,  544  n. 

Langlois,  C.  V.,  405  n. 

Laskine,  M.,  208  n. 

Lassalle,  F.,  73  n.,  159, 261,  294, 329, 376 ; 
and  the  1'  brazen  law,"  321,  426 ;  and 
State  Socialism,  414 ;  and  Rodbertus, 
414-415,  416,  417;  and  Bismarck, 
414  ;  his  career,  432  ;  his  political  and 
economic  programme,  433-435 ;  and 
Marx,  433  n.,  434  n. ;  and  State  inter- 
vention, 434-435 ;  436,  437,  449  »., 
453  n.,  496  n.,  607  n. 

Lauderdale,  Earl  of,  109  n. 

Launay,  M.  de,  609  n. 

Launhardt,  Herr,  529  n. 

Laveleye,  IS.  de,  222,  376,  577  «. 

Lavergne,  L.  G.  de,  371  n. 

Lavoisier,  A.  L.,  15,  125 

Law,  Kropotkin  on,  627  n.,  632  n.  ; 
Reclus  on,  632  n. 

Law  of  capillarity,  137 

Law  of  concentration  of  capital,  Marx's, 
450,  475-476 

Law  of  demand  and  supply,  359-360 

Law  of  diminishing  returns,  118,  126, 
146-147,  148,  153,  157,  340,  341,  373, 
558  and  n. 

Law  of  free  competition,  356-358 

Law  of  indifference,  148,  525,  527  n. 

Law  of  international  exchange,  362-366 

Law  of  population,  Malthus's,  120,  121- 
137  ;  of  the  Classical  school,  358-359, 
373 

Law  of  rent,  362 

Law  of  sale,  Cournot's,  531  n. 

Law  of  self-interest,  355-356 

Law  of  substitution,  525,  526,  528,  537  n. 


Law  of  variation  of  intensity  of  need 
543  n. 

Law  of  wages,  360-362 

Lazare,  B.,  620 

Ledru-Rollin,  A.  A.,  303, 

Legrand,  D.,  486 

Leo  XII,  Pope,  500  n. 

Leo  XIII,  Pope,  501 

Leopold,  Grand  Duke,  of  Tuscany,  and 
the  Physiocrats,  5 

Leroux,  P.,  235  and  n.,  263,  344  n,,  589 

Leroy-Beaulieu,  P.,  137,  254  n.,  342  n., 
375  n, ;  and  the  Mathematical  method. 
537  n.;  546 

Leslie,  Cliff e,  196,  387 

Lesseps,  F.  de,  212 

Letchworth,  613  n. 

Levasseur,  E,  326  n.,  388  n. 

Levy  de  Lyon,  E..  607  n. 

Levy-Briihl,  L,  435  n. 

Lexis,  Professor,  448  n. 

Liberal  individualists,  and  co-operation, 
343 

Liberal  Optimists,  322-348 

Liberal  school,  xv  ;  the  Physiocratio  doc- 
trine and,  46  ;  Adam  Smith  a  member 
of,  53  ;  beginnings  of,  54  ;  and  Adam 
Smith's  theory  of  value,  75 ;  205 ; 
Saint-Simon  and,  210  n. ;  the  Associa- 
tionists  and,  231  ;  233  ;  severance  of, 
into  French  and  English  sections,  322  ; 
and  Protection  and  socialism,  323,  326, 
354;  and  Optimism,  324-326;  and 
liberty,  324,  325-326;  origin  of  the 
name,  324  ;  and  association,  325  ;  and 
Darwin's  doctrine  of  the  survival  of 
the  fittest,  326 ;  and  the  Physiocrats, 
327  ;  Bastiat  and,  327  ;  and  Bastiat's 
theory  of  profits,  342  n. ;  synonymous 
with  the  Individualist  school,  356 ; 
definition  of,  356  n.,  357  n. ;  and  the 
repeal  of  the  Corn  Laws,  366  ;  Le  Play 
and,  486-487  ;  and  solidarity,  607-608 ; 
629 ;  and  government  and  society, 
631 ;  648 

Liberal  Socialism,  573 

Liberalism,  economic,  vii,  xv,  170 ; 
Sismondi  and,  173,  185;  209;  311 
n. ;  the  Classical  school  and,  322; 
and  Optimism,  377 ;  the  reaction 
against,  377-378  ;  effect  of  Bismarck's 
policy  upon,  436 ;  and  measures  of 
social  reform  in  Germany,  436  n. ; 
growth  of,  in  Germany,  439  ;  State 
Socialism  and,  447  ;  the  Christian 
schools  and,  484  ;  493  ;  modern  revival 
of,  516;  586;  political  economy  and, 
646,  647 

Liberalism  of  Adam  Smith,  207  ;  of  the 
Liberal  school,  326 

Liberalism,  political,  the  Saint-Simoniana 
and,  211 

Liberty,  the  French  Revolution  and,  104 ; 
Blanc  on,  262 ;  Sismondi  on,  262  n.; 


INDEX 


659 


Proudhon  and,  293,  297,  315;  the 
French  Liberal  school  and,  324,  325- 
327  ;  Dunoyer  and,  327  ;  Stuart  Mill 
and,  353,  358,  413  ;  and  the  natural 
laws,  355 ;  the  Classical  school  and, 
356 ;  and  State  intervention,  413 ; 
Cournot  and,  413  ;  the  State  Socialists 
and,  440  ;  the  anarchists  and,  622- 
623,  624,  629  ;  Kropotkin  on  liberty 
as  the  corrective  for  the  excesses  of 
liberty,  634 

Liberty,  individual,  the  Physiocratic 
doctrine  and,  10  n.,  11 ;  Proudhon  and, 
315  ;  Ricardo  and  Malthua  and,  410  ; 
Stuart  Mill  and,  411  n. ;  Eodbertus 
and,  429 

Lichtenberger,  A.,  200  n. 

Lie  ben,  R.,  529  n. 

Liebknecht,  W.,  437 

Lilienfeld,  von,  690  n. 

List,  Tf.,  Ill,  and  the  Classical  school, 
169,  289,  290;  his  National  System, 
and  Protection,  265,  268 ;  and  the 
German  tariffs,  266,  267-268 ;  and 
nationality,  270-272  ;  and  productive 
power,  270  ;  and  Germany's  claim  to 
Holland  and  Denmark,  272  ;  and  Adam 
Smith  and  his  school,  273  ;  and  manu- 
factures, 273-274 ;  and  agriculture, 
274,  276-277  ;  his  Protectionism,  275- 
276,  281-282;  origin  of  his  Protec- 
tionist ideas,  277-280  ;  his  influence, 
280-287  ;  and  history,  282,  381,  and 
Carey,  282-284  ;  and  Stuart  Mill,  284- 
285;  his  originality,  287-289;  and 
the  Historical  school,  287,  360  n. ;  and 
free  exchange,  287-288 ;  and  the  indi- 
vidual and  the  nation,  288,  411  ;  and 
the  duty  of  Governments,  288;  and 
economic  reforms  in  Germany,  288- 
289;  his  aim  and  achievement,  290  ; 
323,  378  ;  his  economic  method,  380 ; 
the  Historical  school  and,  380  n. ;  439 

Littre,  M.,  222  n. 

Lloyd,  S.,  266  ». 

Locke,  J.,  559 

Loesewitz,  J.,  502 

Longe,  P.  D.,  361 

Loria,  A.,  469  n. ;  and  land  nationalisa- 
tion, 578  n. 

Lorin,  H.,  499  n. 

Louis  Bonaparte,  320 

Louis  Philippe,  301 

Ludlow,  J.  M.  F.,  504,  505 

Luxembourg  Commission,  the,  302,  304- 
306,  319  n. 

MABLY,  the  Abbe  de,  200  and  n. 
McCullooh,  J.  R.,  62  n.,  109  n.,  139  n., 

140  n.,  141  n.,  150, 168,  175, 177, 349  n., 

379 

Mackay,  J.  H.,  615  n. 
MoVickar,  J.,  349 
Machinery,  Adam  Smith  and,  112  ;  J.  B. 


Say  on,  112  ;  SLsmondi  and,  180-182  ; 
the  Classical  school  and,  180-182 ; 
Ricardo  and,  180  n.,  181 

Maitland,  P.  W.,  vi 

Malon,  Benott,  465  n. 

Malthua,  T.  R.,  xiv,  108,  109  n.,  110, 
116  and  n.,  117  ;  one  of  the  Pessimists, 
vi,  119-120,  192 ;  regarded  as  an 
Optimist,  119  n.  ;  his  career,  120  n.  ; 
his  law  of  population,  120,  121-137, 
157,  345 ;  and  moral  restraint,  127- 
129  ;  and  the  Neo-Malthusians,  134  ; 
on  charity,  135  n.-136  n. ;  corre- 
spondence with  Ricardo,  139  n.,  141  n. ; 
and  rent,  142,  152,  164  ;  and  the  law 
of  diminishing  returns,  146-147  and 
n. ;  149  n.,  150  n.,  155,  156  n. ;  and 
wages  and  population,  158-159,  189  ; 
163  n. ;  and  Protection,  164  ;  Sismondi 
and,  175  ;  Sismondi  and  the  theory 
of  population  of,  189  n. ;  the  Saint- 
Simonians  and,  227  ;  264,  322,  324, 
326,  348,  353;  and  individualism, 
355  ;  358,  359,  371  ;  and  the  identity 
of  public  and  private  interests,  410  ; 
416,  564 

Malthusian  League,  the,  134  n. 

Manchester  school,  xi,  436,  437,  438,  539 

"  Mancheeterism,"  357,  447 

"  Manchesterthum,"  357,  438 

Mandeville,  B.  de,  64,  70  n. 

Mangoldt,  H.  von,  548  n.,  551,  556 

Manifesto,  Communist,  449  n.,  450  n. 

Mantoux,  P.,  66  n.,  97  n.,  103,  104 

Mann,  the  laws  of,  Malthus  and,  132  n. 

Manufactures,  List  on,  273-274, 276  and  n. 

Marat,  J.  P.,  199  H. 

Maroet,  Mrs.,  119  n.,  349 

Marcus  Aurelius,  588 

"  Marginal  utility,"  521  n.,  539 

Marie,  A.  T.,  301,  302  n. 

Markets,  Say's  theory  of,  116 

Marmande,  R.  de,  622  n. 

Maroussem,  P.  du,  495  n. 

Marrast,  A.,  303 

Marriage,  effect  of,  upon  population, 
136  n. ;  the  anarchists  and,  627 

Marshall,  Professor  A.,  329  n..  335,  386, 
390  ».,  391,  392,  394,  396,  397  n.,  401, 
402  n.  ;  compared  with  Marx,  474  n.  ; 
513  n.,  516,  527  n.,  529  ».,  531,  544  tin., 
546  n.,  551  n.,  552  ;  and  rent,  557 
and  n. ;  581 

Martineau,  Miss,  119  n.,  349 

Marx,  Karl,  x  ;  on  Adam  Smith,  66  n.  ; 
his  labour- value  theory,  77, 151  n.,  184- 
186,  201  n.,  216,  293  n.,  474-475,  581  ; 
intellectually  a  scion  of  the  Ricardian 
family,  120 ;  his  theory  of  surplus 
value  and  Ricardo's  theory,  140  ;  re- 
semblance of  doctrines  of,  to  those  of 
the  Classical  school,  181  ;  similarities 
between  Sismondi  and,  184  ;  his  theory 
of  surplus  value,  184,  198,  228,  294  ; 


660 


INDEX 


Marx,  Karl — continued 
and  profit  and  interest,  185,  216 ; 
debt  to  Sismondi,  198  ;  209  n. ;  and 
"  exploitation,"  215,  216 ;  hia  system 
and  communism,  221 ;  his  system 
compared  with  the  Saint-Simoniana', 
225 ;  227  ;  and  List,  278  n. ;  and  his 
"Utopian"  predecessors,  301;  and 
Bray's  scheme,  315  n. ;  and  Proudhon, 
320-321 ;  and  distribution,  368  n. ;  386 ; 
his  socialism,  416,  433,  449-450,  470  ; 
the  object  of  his  system,  423 ;  and  the 
"brazen  law,"  426 ;  429;  and  Eodbertus, 
429  n. ;  Lassallo  and,  433  n.,  434  n. ;  437, 
448  n. ;  his  career,  his  works  and  in- 
fluence, 449  n.-450  n. ;  his  theory  of 
surplus  labour  and  surplus  value,  450- 
459,  474-475  ;  and  capital,  455-458  ; 
his  law  of  concentration  of  capital, 
459-465,  475-476 ;  the  Marxian  school, 
465-473  ;  his  following,  465  n. ;  and 
Ricardo,  466  ;  his  obscurity  of  style, 

466  ;  and  value,  466  and  n.,  474 ;  on 
production,  468  n.-469  n. ;  the  French 
socialists   and,   469 ;    quality    of   his 
economic    theories,    473 ;     compared 
with  Marshall,  474  n. ;  and  syndicalism, 
480-481, 641;  483;  the  Christian  schools 
and  his  collectivism,  485 ;  Herron  on, 
507  n. ;   579 ;    the  Fabians   and   his 
theories,  583-584,  586 ;  and  the  anar- 
chists, 616;  influenced  by  Hegel,  619; 
and  Bakunin,  620;  anarchy  and  his 
socialism,  640 

Marxian  school,  characteristics  of,  465- 
472  ;  and  production,  468  ;  515  ;  be- 
ginnings of,  579 ;  and  Marx's  theory 
of  value,  583  ;  647,  648 

Marxism,  vii,  xv,  447,  449-483  ;  and  the 
Classical  school,  467,  472;  Sorel  on, 

467  n. ;  and  capitalism,  467  ;  a  work- 
ing-class socialism,  470-471,  480  ;  the 
evolution  of,  473  n. ;  and  syndicalism, 
479-483 ;    its  contempt  for  intellec- 
tualism,  480  ;   traced  in  the  doctrines 
of  Le  Play's  school,  495 ;  the  Fabians 
and,  583-584,  586 ;   the  rupture  with 
anarchism,  620 

Mathematical  school,  the,  x  ;  Quesnay  a 
pioneer  of,  19  n. ;  and  the  abstract 
method,  138 ;  335 ;  and  the  Mathe- 
matical method,  392 n.,  537jn.,  538-539; 
and  the  Psychological  school,  521 ;  prin- 
cipal adherents  of,  528  n. ;  doctrines  of, 
528-537  ;  and  exchange,  528-530  ;  and 
distribution,  529-530  ;  and  consump- 
tion, 530  ;  and  value,  530  n. ;  and 
production,  536  ;  and  free  competition, 
643 ;  influence  of,  544  ;  and  solidarity, 
613 

Maurice,  F.  D.,  504  and  n.,  505,  508  n. 

Mazel,  F.,  316,  317 

Mecklenburg,  268  n. 

Mehring,  F.,  434  n. 


Meline,  M.,  17  ». 

Melouga  family,  489,  493 

Meneniua  Agrippa,  588 

Monger,  A.,  209,  212,  231  n.,  316n.;»nd 
the  origin  of  Rodbertus's  ideas,  415  n. ; 
and  Marx,  416  n.,  450  n. ;  and  Fichte, 
436  n. ;  and  private  and  public  rights, 
607  n. 

Menger,  K.,  75,  380 ;  and  the  historical 
method  382,  383  n.,  402  n. ;  and  the 
Historical  school,  389,  390,  395,  517 ; 
and  the  deductive  method,  396  nn. ; 
and  the  final  utility  theory,  622  n. ;  and 
the  theory  of  rent,  557 

Mercanti  di  tenute,  190 

Mercantilism,  the  "  net  product "  theory 
and,  17  ;  influence  of  Physioc ratio  ideas 
upon,  27  ;  Physiocracy  antagonistic  to, 
29 ;  and  agriculture  and  industry, 
30  n. ;  Adam  Smith  and,  83,  97,  98, 
100,  101,  169  ;  List  and,  279 

Mercantilist  school,  1  ;  and  the  increase 
of  wealth,  17  ;  their  view  of  the  State, 
27  ;  Adam  Smith's  Wealth  of  Nation 
and,  83 ;  and  money,  83,  314 ;  List 
and,  280,  285  n. 

Meredith,  George,  432  n. 

Meslier,  the  Cur£,  200  n. 

Method,  the  relative  importance  of,  397, 
645 

Metin,  A.,  677  n.,  679  n. 

Meyer,  Ed.,  402  n.,  405  n. 

Meyer,  R.,  416  and  n.,  417  nn.,  423  n., 
428  n. 

Mieux  value,  184 

Milcent,  M.,  502  n. 

Mill,  James,  and  rent,  155, 168,  562 ;  and 
land  nationalisation,  155,  168  ;  a  dis- 
ciple of  Ricardo,  168,  349  n.  ;  352  n. 

Mill,  John  Stuart,  xv ;  and  productive 
and  unproductive  works,  62 ;  "  in- 
dustry is  limited  by  capital,"  72  n. ; 
and  Adam  Smith's  conception  of 
utility,  75  n. ;  and  international  trade, 
98,  100,  330  n. ;  and  "  products," 
109  n. ;  138  ;  and  Ricardo's  theory  of 
rent,  141 ;  and  the  stationary  state, 
162,  373-374,  606  n. ;  222  n. ;  on 
Saint-Simonism  and  Fourierism,  255  ; 
280;  and  Protection,  283,  284-285, 
365  ;  and  List,  285  n. ;  and  the  Classi- 
cal school,  322,  352-353,  368  ;  349  ; 
his  career  and  works,  352  n.,  353  ;  and 
socialism,  352  n.,  353,  358,  367,  368 ; 
and  communism,  353,  367  ;  and  com- 
petition, 353,  358  ;  and  co-operation, 
353 ;  and  individualism,  355,  356 
and  n. ;  and  laissez-faire,  357 ;  and 
the  law  of  population,  358-359 ;  and 
the  law  of  demand  and  supply,  359- 
360,  519;  and  value,  360;  and  the 
law  of  wages,  360-362 ;  and  trade 
unionism,  360, 362  n. ;  and  Malthas,  362 
n. ;  and  rent,  362,370-372, 548, 551,553, 


INDEX 


661 


564-555  ;  and  international  exchange, 
364-365 ;  and  Free  Trade,  365, 411  n. ; 
influence  upon  economics,  367  ;  French 
influence  upon.  367,  579  ;  and  natural 
law,  368 ;  his  programme  of  social  reform, 
36D-374;  and  wages,  309-370;  and  asso- 
ciation, 370, 505  ;  and  inheritance,  372 ; 
his  successors,  374-376;  377,  379;  and 
relativity,  392;  and  self-interest, 
394,  411;  404;  and  the  identity 
of  general  and  personal  interests, 
411 ;  and  State  intervention,  411, 
413;  and  individual  liberty,  411 
n.,  413 ;  Chevalier  and,  411;  and 
the  State  and  the  individual,  442,  443, 
444  ;  on  Le  Play's  theory  of  the  salva- 
tion of  the  working-classes  by  the 
upper,  491 ;  on  the  rent  of  ability, 
549 ;  and  man's  right  to  the  land,  561 ; 
and  the  confiscation  of  rent,  562-563, 
666,  667,  568,  569,  670-571,  575  ;  564  ; 
and  private  property,  568  n. ;  and 
the  abolition  of  profit,  605  n. 

Millerand,  A.,  587  n. 

Mines  and  the  "  net  product,"  14 

Mirabeau,  Marquis  de,  one  of  the  Physio- 
crats, 3  n.  ;  and  Rousseau  and  Physio- 
crapy,  6  n. ;  and  the  origin  of  the  term 
laissez-faire,  1 1  n. ;  on  the  Tableau 
economiquc,  18  n.  ;  and  interest,  32- 
33  ;  Cantillon's  influence  upon,  46  n. ; 
on  population,  121 

Molinari,  M.  de,  248,  329  n.,  358  n. 

Mollien,  the  Comte,  314 

Money,  Adam  Smith  and,  71,  82-85,  89, 
106,  115;  the  Physiocrats  and,  115; 
Ricardo  and  the  quantity  theory  of, 
164-165;  Ricardo  and  paper  money, 
165-167 ;  Robert  Owen  and,  240-241, 
243 ;  Proudhon  and,  308-310, 313, 316  ; 
Solvay's  scheme,  318-319  ;  the  Classi- 
cal school  and,  360 ;  Ruskin  and 
Tolstoy  and,  510 

Monod,  W.,  508  n.,  509  n. 

Monopoly,  z  ;  Adam  Smith  and,  95,  96  ; 
Stuart  Mill  and,  554  n. ;  and  the  rent 
of  land,  554  n. 

Monopoly  price,  Adam  Smith  on,  81  n. 

Montague,  La,  200  n. 

Montalembert,  the  Comte  de,  487  ». 

Montchretien,  A.  de,  1 

Montesquieu,  C.  de  S.,  121 

More,  Sir  Thomas,  200  and  n.,  246 

Morellet,  the  Abbd,  46 

Morelly,  200  and  n. 

Morris,  Wm.,  251 

Moufang,  Canon,  496 

Mulhouse,  the  Industrial  Society  of,  172 

Miiller,  Adam,  278  n. 

Mun,  the  Comte  de,  484  n.,  497,  502 

Mutual  aid,  the  anarchists  and,  629-636 

Mutual  credit,  314,  316 ;  solidarity  and, 
606 

Mutnalists,  and  solidarity,  602,  603-604 


Mutuality,  Prondhon  and,  297  n.,  299, 
300 


NAPOLEON  I,  107 

Napoleon  III,  280,  323,  366,  375,  490  n. 

Nassau,  268  n. 

National  Equitable  Labour  Exchange. 
236  n.,  241-242,  244  ». 

National  workshops  of  the  1848  Revolu- 
tion, 301-303 

Nationalisation  of  the  land,  570-578 

Nationality,  Last  and,  270-272 

Natural  laws,  354-366,  368,  385  n. ; 
the  anarchists  and,  628,  629 

"  Natural  order,"  the,  xiv,  5-12  ;  mean- 
ing of  the  term,  6-8 ;  the  Physiocrats' 
conception  of,  8,  9-10,  109 ;  Turgot 
on  the  universality  and  immutability 
of,  10  ;  and  the  old  regime,  10 ;  the 
aim  of,  10-11  ;  and  the  right  of  private 
property  and  individual  liberty,  10  n., 
11 ;  comprehensiveness  of,  12  ;  the  ban 
prix  and,  15  ;  property  the  "  founda- 
tion-stone "  of,  21  ;  and  trade,  29 ; 
the  conception  of,  constitutes  the 
foundation  of  political  economy,  46  ; 
Adam  Smith  and,  109 ;  Ricardo's 
theory  of  rent  and,  152  ;  the  French 
Classical  school  and,  322,  323;  the 
Christian  schools  and,  484 

"  Naturalism,"  Adam  Smith's,  68-88 

Naumann,  Pastor,  507 

Navigation  Laws,  101  n. 

Neale,  Vansittart,  504 

Necessity,  the  laws  of,  Kropotkin  on, 
628  n. 

Necker,  J.,  and  free  trade  in  corn,  32 ;  157 

"  Negative  rent,"  558 

Neill.  C.  P.,  277  n. 

Neo-Classical  school,  10,  397 

Neo-Malthusians,  130,  134 

Neo-Marxism,  473-483  ;  and  the  labour- 
value  theory,  474  ;  and  surplus  labour 
and  surplus  value,  475 ;  and  syndi- 
calism, 479-483 

"  Net  product,"  the,  12-18  ;  agriculture 
the  sole  source  of,  12, 14  ;  mines  doubt- 
ful yielders  of,  14  and  n. ;  disappears 
when  prices  are  low,  15 ;  the 
illusion  of,  16 ;  rent  and,  16 ;  value 
of  the  theory  of,  17  ;  and  Mercantilism, 
17;  non-existent.  24;  interest  a  sym- 
bol of,  32  ;  taxation  should  be  drawn 
from,  38-40,  41 ;  adaptation  of*  to  the 
impSt  unique,  43  ;  453  n. 

Netchaieff,  639  and  n. 

Nettlau,  M.,  619  n. 

New  Harmony,  Owen's  colony,  236  n., 
241  n.,  246,  257 

New  Moral  World.  236  n. 

Nicholas  I,  Tsar,  639  ». 

Nicholson,  Professor  J.  S.,  52  n.,  266  n., 
592  n. 


662  INDEX 

Nietzsche,  511,  616  and  a. 

Nitti,  F.  S.,  503  n. 

"  Noble  savage,"  the  cult  of  the,  7 

44  Normal,"  the  term,  271 

North,  Dudley,  54 

North,  Lord,  105 

OBEBLIN,  Pastor,  486 

Office  du  Travail,  257  n. 

Ogilvie,  W.,  560  and  n. 

Oldenburg,  268  n. 

Olivier,  P.,  611  n. 

Ollivier,  E.,  324 

Oncken,  H.,  11  ».,  17,  19  n.,  30,  383  n., 
414  n.,  432  n. 

Ophelimity,  75, 91,  99, 522  n.,  541  ».,  572 

Optimism,  xv ;  Adam  Smith's,  68-69, 
88-93;  the  French  Liberal  school 
and,  324-327;  Bastiat  and,  327,  377  ; 
Carey  and,  327,  493 

Optimist  school,  definition  of,  356  n., 
357  n. 

Optimists,  the,  118,  322-348,  354,  356, 
368, 438 

Orbiston,  Robert  Owen's  colony  at,  236  n. 

Organic  sociologists,  the  Physiocrats  the 
forerunners  of,  7 

"  Organisation  of  labour,"  300,  303-305, 
319 

Orthodox  school,  169,  176,  326 

Ott,  A.,  317  ».,  420  n. 

Over-production,  J.  B.  Say  and,  115- 
117 ;  171 ;  Sismondi  and,  176,  178- 
182 ;  the  Classical  school  and,  181  ; 
Marx  and,  461 

Owen,  Robert,  169,  171  ;  Sismondi  and, 
173  n.,  184,  194 ;  201  n.  and  associa- 
tion, 232  n.,  233  ;  and  Fourier,  234- 
235,  245  ;  and  the  Chartist  movement, 
235  ;  and  socialism,  235  ;  his  career, 
235  n. ;  his  industrial  reforms,  236- 
237  ;  and  association,  237  ;  and  the 
social  milieu.  237-239;  and  profit, 
239-244  ;  and  money,  240-241  ;  and 
the  National  Equitable  Labour  Ex- 
change, 241-242 ;  and  co-operative 
societies,  243-244,  504 ;  founded  no 
school,  244 ;  246,  255,  261,  264,  290, 
293,  315,  316,  323,  370,  378,  470,  579 

P  ASP'S,  0.  DB,  459  n, 

Paillottet,  P.,  343  n. 

Paine,  Tom,  560  and  n. 

Pantaleoni,  M.,  36  n.,  530,  538  n.,  542, 
551  nn. 

Parable,  Saint-Simon's,  204-205 

Pareto,  V.,  71  n. ;  on  prices,  76  n.-77  n.  ; 
99,  231  n. ;  and  Free  Trade,  288  n. ;  on 
method,  397  ;  and  maximum  utility 
and  maximum  ophelimity,  412  ;  421, 
448,  516,  521  n.,  522  n.,  529  n.,  533  n., 
534  n.,  536  and  n.,  537  n.,  540  n., 
541  n. ;  and  the  Hedonists,  542  ;  544  n., 
555  ». ;  and  the  relative  duration  of 


rents,  557 ;  and  negative  rent,  558  • 
on  solidarity,  608  n. 

Passy,  F.,  509  n.,  592  n. 

Passy,  H.,  371  n. 

Patten,  Professor,  285  n.,  522  n.,  542  n. 

Pearson,  K.,  407  n. 

Peasant  proprietorship,  371-372 

Pecqueur,  C.,  304-305,  449  n. 

Peel,  Sir  Robert,  280,  366 

Pellarin,  C.,  245  n. 

People's  Bank,  308  n.,  317  n.,  319-320 

Pereire,  E.  and  I.,  212,  226 

Perin,  C.,  502  n. 

Personal  interest — see  Self-interest 

Pervinquiere,  M.,  14 

Pessimism,  the  French  Liberal  school  and, 
324 

Pessimista,  the,  118-120;  and  rent,  118; 
and  the  law  of  diminishing  returns, 
118;  Mill  and,  372 

Petty,  W.,  54 

Pfluger,  Pastor,  507 

Phalange,  248-250 

Phalanstere,  245  n.,  246-252,  255,  257, 
297  n.,  604,  635 

Physiocracy,  4  n. ;  a  popular  craze,  5  ; 
Adam  Smith  and,  63  ;  J.  B.  Say  and. 
108-109  • 

Physiocrats,  the,  xi  n.,  1-50 ;  and  the 
conception  of  political  economy,  2 ; 
the  first  school  of  economists,  3 ;  the 
Abbe  Baudeau  on,  3  n.  ;  bibliography 
of  the  system,  4  n.-5  n. ;  and  the 
"  natural  order,"  5-12  ;  Rousseau  and, 
6  ». ;  and  the  civilised  state  as  op- 
posed to  a  state  of  nature.  7  ;  fore- 
runners of  the  organic  sociologists,  7  ; 
their  conception  of  the  "  natural 
order,"  and  man's  duty  with  regard 
to  it,  8,  9-10,  87-88  ;  and  the  rights  of 
private  property  and  individual  liberty, 
10  n.,  11;  and  the  "  net  product," 
12-18,  141  ;  and  land  as  an  agent  in 
production,  12 ;  on  industry  and 
commerce,  12-13  ;  and  the  "  sterile 
classes,"  14,  21  ;  and  mines  and  the 
"  net  product,"  14  and  n. ;  and  agri- 
cultural and  industrial  production,  15  ; 
their  influence  upon  practical  politics, 
17  ;  and  the  circulation  of  wealth,  18- 
26 ;  their  regard  for  private  pro- 
perty, 21-26,  199  n.-200  n.,  217  ;  and 
the  duties  incumbent  upon  landed 
proprietors,  25-26  ;  and  the  abolition 
of  corporations,  26  n.-27  n. ;  and  trade, 
27-33  ;  and  Mercantilism,  27,  29,  169, 
314 ;  the  founders  of  Free  Trade, 
29 ;  and  reciprocity,  31  ;  Galiani'a 
criticism  of,  32  ;  and  the  question  of 
interest,  32-33  ;  and  the  functions  of 
the  State,  33-37 ;  and  legislation, 
33-34;  and  political  liberty,  34  n.; 
and  the  sovereign  authority,  35-37, 
41  ;  and  education,  37 ;  and  inter. 


INDEX 


663 


nationalism,  37  ;  and  taxation,  38-45 ; 
and  the  fiscal  system  of  the  French 
Revolution,  44,  104 ;  rrtume  of  their 
doctrine,  45-50;  Adam  Smith  and, 
51  n.,  56,  56,  62,  63,  64,  65,  69,  80, 
88,  93,  98,  100 ;  89,  97 ;  J.  B.  Say  and, 
108-109  ;  Germain  Gamier  and,  108  ; 
and  money,  115  ;  and  population,  122  ; 
and  rent,  142  ;  and  Free  Trade,  98, 153, 
163 ;  and  the  natural  identity  of 
individual  and  general  interests,  185 ; 
201  n. ;  the  Associationists  and,  232- 
233  ;  322,  323  ;  and  their  successors, 
327 ;  331,  338  n.,  347,  348,  354,  371, 
572,  629,  644 

Pitt,  William,  104,  105 

Place,  F.,  159  n. 

Plato,  200  and  n. 

Play,  7.  Le,  137,  196,  238,  304 ;  his 
school,  486-495;  his  career,  486  n.- 
487  n. ;  his  family  system,  488-493  ; 
and  the  State,  488  ;  his  method,  492  ; 
and  the  Historical  school,  493-494; 
the  division  in  hi*  school,  494-495 ; 
497,  602 

"  Plutology,"  376 

Podmore,  P.,  236  n. 

Political  economy,  origin  of  the  term,  1  • 
Quesnay  and  his  school  the  virtual 
founders  of  the  science,  2  ;  Adam 
Smith  as  founder  of,  50-51,  103  ;  the 
scope  of,  in  Adam  Smith's  system,  55- 
56 ;  Quesnay's  conception  of,  88 ; 
Adam  Smith's  conception  of,  88,  89, 
110 ;  J.  B.  Say's  influence  upon, 
107,  111  ;  influence  of  Mai  thus 
and  Ricardo  upon,  108 ;  the  Physio- 
crats and,  109  ;  J.  B.  Say's  conception 
of,  110-111  ;  Say's  treatment  of,  117, 
175  ;  a  fashionable  craze,  119  n.,  349  ; 
Ricardo  and,  138, 139  n.,  175  ;  the  new, 
the  attack  upon,  169 ;  Sismondi  and, 
173-178,  184,  196,  198,  380;  the 
Historical  school  and,  175,  222,  380, 
381  ;  the  Classical  school  and,  177  ; 
A.  Comte  and,  201  n. ;  Saint-Simon  on, 
209  n.  ;  List  and,  270,  380-381  ;  and 
politics,  288  ;  significance  of  the  ad- 
vent of,  327 ;  McVickar  on,  349  ; 
Senior  and,  350  ;  Stuart  Mill  and,  353  ; 
not  a  "  dismal  science,"  354  ;  the  re- 
action against  Liberalism,  377 ;  de- 
velopment of  the  abstract  method  in, 
379-380 ;  the  socialists  and,  381  ; 
Roscher  and,  383-384;  Hildebrand 
and,  383-384  ;  Knies  and,  384-385  ; 
the  newer  Historical  school  and,  386 ; 
Toynbee  and,  386  n.  ;  development  of, 
in  France,  388  ;  influence  of  the  His- 
torical method  upon,  388 ;  Menger 
and,  389  ;  Ashley  and,  391  n. ;  and 
sociology,  404  ;  Ruskin  and,  510  n.  ; 
Carlyle  on,  511  and  n.  ;  modern  claims 
for,  517  ;  Pare  to  and,  636  n. ;  recog- 


nised  as  independent  of  parties  and 
ideals,  583  ;  development  and  future 
of,  643-648;  simplicity  of  Adam 
Smith's  system,  644 ;  divergency  of 
objects  and  methods  among  econo- 
mists, 646-647  ;  Liberalism  and,  646, 
647 

Political  Economy  Club,  139  n. 

Pollock,  Sir  F.,  559 

Poor  Law,  English,  Malthus  and,  130  n., 
136  n. ;  Sismondi  and,  195 

Population,  Adam  Smith's  supply  and 
demand  theory  applied  to,  82,  89,  188  ; 
dependent  upon  capital,  90  ;  Mai  thus 'a 
law  of,  120,  121-137,  142,  167,  345 ; 
the  "  repressive  checks,"  126-127  ;  the 
"  preventive  checks,"  127-129,  137  ; 
the  reproductive  capacity  and  intel- 
lectual activity,  137  n.-138  n. ;  Sis- 
mondi on  the  regulation  of,  by  revenue, 
188;  wages  and,  189;  Sismondi  and 
Malthus's  theory,  189  n. ;  Carey's 
theory  of,  346;  development  of  the 
theory  of,  645 

Port  Sunlight,  255,  513  n. 

Positivism,  Saint- Simon  the  father  of, 
203;  213 

Pothier,  R.  J.,  587  n. 

Potter,  B.  (Mrs.  Sidney  Webb),  687  n. 

Price,  demand  and  supply  and,  519-520  ; 
cost  of  production  and,  520  ;  and  rent, 
520 

Prices,  Adam  Smith's  theory  of,  74-81 ; 
Walras  and,  114  ;  the  recent  theory  of, 
515 ;  development  of  the  theory  of, 
645 

Principles  of  Revolution,  The,  639 

Producer,  subordination  of,  to  consumer, 
342-343 

Producer's  rent,  627  n. 

Producers,  and  social  reorganisation, 
605  n. 

Producers'  associations,  604 

Production,  the  accretion  of  value  is,  16  ; 
labour  as  the  cause  of,  24  ;  the  Physio- 
cratic  conception  of,  46,  49  ;  the  three 
factors  of,  56  n. ;  Adam  Smith  and,  80, 
419  ;  adaptation  of  supply  to  demand 
the  basis  of  our  theory  of,  82  ;  J.  B. 
Say  and,  109  ;  Sismondi  and,  177,  178- 
182,  193,  419 ;  the  Classical  school 
and,  177  ;  net  and  gross.  Sismondi  and, 
189-190  ;  the  Christian  Socialists  and, 
196 ;  the  Saint- Simonians  and,  199, 
226-227  ;  Dunoyer  and,  347-348 ; 
Senior  on  agricultural  and  industrial 
production,  362  n. ;  Stuart  Mill  and, 
368-369;  Rodbertus  and,  419-421, 
430  ;  State  Socialism  and,  444  ;  Marx 
on,  468  n.-469  n. ;  cost  of.  and  value, 
520,  526  ;  cost  of,  and  price,  520,  534  n.; 
the  Hedonists  and.  533  ;  the  expansion 
of.  under  the  influence  of  applied 
science,  635-636 


664 


INDEX 


Productive  power,  List  and.  270, 272-742 

Productivity  theory  of  capital^  502,  683  ; 
of  wages,  527-528 

Profit,  Adam  Smith  on  the  relation  of, 
to  rent,  64  n. ;  Adam  Smith's  conception 
of,  65  n.,  80,  114 ;  Smith  on  high 
profits,  67,  74  n. ;  dependent  on  ex- 
change value,  90;  Ricardo  and,  114, 
160-163,  373  ;  the  Pessimists  and,  118  ; 
Marx  and,  185, 457-458  and  n. ;  Robert 
Owen  and  the  abolition  of,  239-243 ; 
Bastiat  and  the  relation  of,  to  wages, 
340-342,  550-551;  Stuart  Mill  and, 
373  n. ;  the  term  as  understood  by 
English  and  French  economists,  373  n. ; 
the  Classical  school  and,  520  ;  Walras 
and,  534  n.-535  n. ;  rent  and,  545 ; 
Walker  and,  550-551 ;  Pantaleoni  on, 
651  n.  ;  Stuart  Mill  and  the  abolition 
of,  605  n. 

Profit-sharing,  the  Saint-Simonians  and, 
227 

Property,  private,  the  Physiocratio  doc- 
trine and,  10  n.,  11,  21,  24-25 ;  respect 
for,  during  the  French  Revolution,  25  ; 
Turgot's  views  upon,  25 ;  Rioardo's 
theory  of  rent  and,  154,  558-559  ;  Sis- 
mondi  and,  198  ;  the  Saint-Simonians 
and,  199-201,  213-225,  294  n. ;  con- 
sidered from  the  point  of  view  of 
ethics,  200  ;  Saint-Simon  and,  210  ;  ex- 
ploitation and,  215  ;  Fourier's  Phalan- 
stere  and,  248-249;  the  Radical 
Socialists  and,  251  ;  Proudhon  and, 
290-300,  315;  Brissot  and,  292  n. ; 
Bastiat  and,  337  ;  Marx  and,  463-464 ; 
the  Christian  Socialists  and,  506 ; 
Tolstoy  and,  513  ;  the  Hedonists  and, 
540  n. ;  considered  to  be  unjust,  559  ; 
Stuart  Mill  and,  568  n. ;  Gossen  and, 
572-573  ;  solidarity  and,  606-607  ;  the 
anarchists  and,  626-627,  641  ;  syndica- 
lism and,  641  ;  socialism  and,  642 

Proprietor,  the,  in  Ricardo's,  Proudhon's, 
and  Bastiat's  view,  336 

Protection,  the  probable  attitude  of  the 
Physiocrats  to,  17  ;  influence  of,  on 
agriculture  and  on  industry,  30  n.  • 
Adam  Smith's  criticism  of,  98-99 ; 
Ricardo  and,  163  n. ;  Mai  thus  and, 
164  ;  Sismondi  and,  264  n.-265  n.  ; 
Saint-Simon  and,  265  n. ;  the  Saint- 
Simonians  and,  265  n. ;  List  and,  265, 
268-290 ;  and  agriculture,  List  on, 
276  and  n. ;  in  the  United  States,  279  ; 
in  Germany,  279,  280,  281 ;  in  France, 
280,  281,  323,  354;  Carey  and,  282- 
284  ;  Duhring  and,  289  n. ;  in  England, 
323, 354;  Bastiat  and,  329-330 ;  follows 
the  interest  of  the  producer,  343 ;  the 
Liberal  school  and,  354 ;  Stuart  Mill 
and,  365 ;  the  Social  Catholics  and, 
501  n. ;  and  solidarity,  602 

Proudhon,  J.  J.,  169 ;   and  government, 


209,  310,  311.  624  n.,  627;  his  Er 
change  Bank,  242,  291,  293  «.,  308-319 ; 
and  private  property,  290-300 ;  bis 
works,  291  n.-292  n. ;  his  career  and 
his  character,  291-292;  and  interest, 
293  n. :  and  labour,  293  ;  and  socialism, 
296-300;  and  Fourier,  296,  297  n,  ; 
and  the  communists  and  communism, 

296,  297,    298,    299,   300;     and   the 
economio  fo;    ;s,  296-297  ;   on  liberty, 

297,  315  ;  and  association,  297  and  n. ; 
on  justice,  208-299 ;    and  exchange, 
299-300  ;  and  the  Revolution  of  1848, 
300-308 ;    and  "  the  right  to  work," 
301 ;    and  money,  308-310,  313-314  ; 
and  co-operation.  315  ;  and  solidarity, 
317  ;  and  the  People's  Bank  319-320  ; 
influence  after   1848,  320-321 ;    Marx 
and,  320-321,  449  n.  462 ;  new  interest 
in  his  ideas,    321  ;     323,    329 ;    and 
Bastiat,  333  n.-334  n.,  343  ;  and  the 
proprietor,  336  ;  378,  415  n.,  429  n., 
450,  486  ;  on  land,  559  ;  and  the  con- 
fiscation of  land,  560  ;    607  n.,  613  ; 
the  and   anarchists,    615,   641  ;    616, 
619  and  n. ;  and  Bakunin,  620  ;  622  ; 
and  the  individual,  622-623  ;  and  the 
idea  of  humanity,  623  ;    and  reason, 
628  ;  and  society,  630,  631  n. ;  on  the 
harmony   of  individual   and    general 
interests,  633  n. ;  634  ;  and  revolution, 
637  ;  and  syndicalism,  641 

Providential  order,  Bastiat  and,  331 

Prudhommeaux,  M.,  264  n. 

Prussia,  the  tariff  of  1821  of,  and  Adam 

Smith's  doctrines,   106  n. ;    tariffs  in, 

in  the  early  nineteenth  century,  266 ; 

and  the  Zollverein,  268  ;   industry  in, 

281  n. 

Psychological  school,  the,  397  n.,  521-528 
Puech,  M.,  321  n.,  323  n. 
?!  Pure  "  school,  the,  353,  392 

QUANTITY  theory  of  money,  360 
Quaai-contract  theory,  595-599,  603  n., 

606 

Quesnay,  F.,  2-5 ;  virtually  the  founder 
of  political  economy,  2 ;  his  works, 
3  n. ;  on  natural  right,  7  nn. ;  and  the 
analogy  between  social  and  animal 
economy,  7  ;  and  the  "  natural  order," 
9,  10  and  n., ;  and  the  "  net  product," 
15 ;  his  theory  of  the  circulation  of 
wealth,  and  the  Tableau  tconomiqut, 
18-20  ;  on  the  productive  and  sterile 
classes,  21  n. ;  on  the  landed  pro- 
prietors, 21  n. ;  on  the  security  residing 
in  property,  24  n.  ;  on  the  safety  of 
property  as  the  basis  of  economic  order, 
25 ;  on  the  poor,  26  n. ;  on  foreign 
trade,  28 ;  on  Free  Trade,  29  nn. ; 
on  the  "  good  price,"  29  ;  on  American 
competition,  30  n. ;  on  Protection, 
31  n. ;  and  interest,  33  ;  on  laws,  34 ; 


INDEX 


665 


on  the  sovereign  authority,  35 ;  on 
despotism,  36  n. ;  on  education,  37  ; 
on  Government  expenditure,  38  n. ; 
and  the  "  iron  law,"  42-43  ;  and  wages, 
43  n. ;  and  value,  47  n. ;  54  ;  and 
Adam  Smith,  55  ;  and  agriculture  as 
the  source  of  all  wealth,  56 ;  his  con- 
ception of  political  economy,  88  ; 
Adam  Smith's  criticism  of  his  theory, 
88  ;  201  n.,  232,  298 

Quetelet,  L.,  407  n. 

Quod  Apostolici,  Encyclical,  500  n. 

RADICAL  party,  English,  372 

Radical-Socialist  party,  592,  601 

Rae,  J.,  52  n.,  64  n.,  66  n.,  96  n.,  103  n., 
106  n. 

Ragaz,  Professor,  507 

Raiffeisen,  F.  W.,  496,  503  n. 

Rambaud,  J.,  xi,  277  n.,  503  n. 

Rau,  K.  H.,  352,  379 

Rauschenbusch,  W.,  507  n. 

Raymond,  D.,  277  n. 

Reason,  the  anarchists  and,  628,  641 

Reciprocity,  Mercier  de  la  Riviere  on,  31 ; 
Proudhon  on,  310  n. 

Reclus,  £.,  615,  619,  622,  624,  627  n., 
628,  632  n.,  636,  637 

Reichel,  631  n. 

Reid,  T.,  560 

Religion,  Robert  Owen  and,  238-239 

Renard,  G.,  465  n.,  469  n. 

Renouvier,  C.  B.,  403  n.,  560 

Rent,  the  theory  of,  xv ;  Ricardo's  con- 
ception of  the  nature  of,  16,  114 ;  and 
the  "  net  product,"  17  ;  Adam  Smith 
and,  64,  80,  92  ;  relation  of  wages  and 
profit  to,  64  n. ;  J.  B.  Say  and,  114- 
115,  556;  the  Pessimists  and,  118; 
Ricardo's  theory  of,  138,  140-157,  164, 
335,  338,  339,  370,  545-546,  547,  548 
andn.,  552-553,  544  n.,  555  n.,  558- 
559,  561,  581-583,  587;  differential 
rent,  142,  546-558  ;  Malthus  and,  142, 
]  52,  164 ;  James  Mill  and,  155,  562 ; 
the  Saint-Simonians  and,  213  n.,  214, 
562;  Carey  and,  327,  338-340,  425, 
545,  546;  Bastiat  and,  335-338,  340, 
425,  545,  546  ;  Fontenay  and,  338  n. ; 
Senior  and,  350-351,  302;  the  Classi- 
cal school  and,  362,  520,  547  ;  Stuart 
Mill  and,  H62,  370-372,  548,  554,  555, 
602-563,  566,  567-568,  569  ;  Eodber- 
tus  and,  424,  425;  modern  econo- 
mists and,  516 ;  and  price,  520  ;  an 
"  unearned  increment,"  545  ;  growth 
in,  546;  of  land,  546-548,  554-555, 
556-557  ;  of  capital,  548-549  n. ;  558  n., 
583  ;  of  ability,  549,  551,  582,  683 ; 
Walker's  theory,  549-552 ;  and  profit, 
550-552  ;  and  the  Classical  theory  of  dis- 
tribution, 553  ;  a  consequence  of  the 
laws  of  value,  5o5  ;  of  land,  a  species 
of  the  income  of  fixed  capital,  556  ;  a 

H.D. 


scarcity  price,  656;  dchaffle  and, 
556-557 ;  K.  Menger  and,  557 ;  rela- 
tive permanence  of  renti,  557 ;  negative 
rent,  558;  J.  B.  Clark  and,  558  n.; 
and  private  property,  558-559  ;  man's 
right  to  the  land  and  the  theory  of 
rent,  561 ;  of  land,  spontaneous  cha- 
racter of,  561  ;  the  confiscation  of, 
562-570  ;  Henry  George  and,  563-568, 
569 ;  the  relation  of  wages  to  the  in- 
crease in,  566  and  n. ;  Gossen  and 
Walras  and  the  confiscation  of,  574- 
675  ;  Sidney  Webb  and  Ricardo'a 
theory  of,  681-583 ;  interest  regarded 
as,  582;  "economic  rent,"  582  n., 
583  n. ;  the  Fabian  doctrine  and 
Ricardo's  theory  of,  587 

Rerum  Novarum,  Encyclical,  501  n. 

Revolution,  Proudhon  on,  320  n.  ; 
Marxism  and,  471-472  ;  Neo-Marxism 
and,  481-482  ;  Buchez  on  Christianity 
and,  496 ;  the  anarchists  and,  637-640, 
641 

Revolution,  French,  the  Physiocratio 
system  and,  44,  104;  socialism  and, 
199  n. ;  the  leaders  of,  and  private 
property,  199  n.-200  n. ;  205,  214,  223 

Revolution,  the  Industrial,  65,  104,  111 

Revolution  of  1848,  Blanc  and,  256; 
Proudhon  and,  300-308,  311  n. ;  and 
socialism,  300 ;  436-437 

Revolutionary  Cafec/ti£m,Netchaien"s,639 

Reybaud,  M.,  300-301,  306,  354 

Ribbes,  M.  de,  492  n. 

Ricardo,  D.,  x,  xiv ;  against  the  idea  that 
nature  is  the  only  source  of  value,  16 ; 
his  conception  of  what  rent  is,  16; 
and  Adam  Smith's  reference  to  utility, 
75  n. ;  and  international  trade,  98,  99, 
100,  163-164,  363  and  n.-364  and  n. ; 
influence  on  political  economy,  108, 
138, 175  ;  and  distribution,  114, 139-40  ; 
and  wages  and  profits,  114,  157-163, 
373 ;  and  crises,  117,  177,  192  ;  com- 
pared with  J.  B.  Say,  118;  regarded 
as  an  Optimist,  119  n. ;  one  of  the 
Pessimists,  vi,  119-120,  192  ;  hia 
place  in  economics,  his  work  and 
literary  style,  138-139 ;  his  career, 
139  n. ;  his  theory  of  rent,  138,  140 
141-157,  164,  335,  338,  339,  370,  545- 
546,  547-548  and  n.,  552-553,  554  n., 
655  n.,  558-559.  676 ;  his  theory  of 
value,  138,  140-141,  149-151,  240; 
and  labour  and  value,  140, 144  n.,  332 ; 
and  the  law  of  diminishing  returns, 
146-147,  373,  576;  and  the  balance 
of  trade  theory  and  the  quantity  theory 
of  money,  164-165  ;  and  paper  money, 
165-168;  Sismondi  and,  174-175, 
177  and  n.,  880 ;  and  machinery, 
180  n.,  181  and  n, ;  and  wages  and 
population,  189 ;  the  Saint-Simonians 
and,  227;  228;  and  property,  228; 


666 


INDEX 


Ricardo— Continued 

264;  List  and,  269;  287,  322,  824; 
and  the  proprietor,  336;  348,  349; 
and  the  income  of  capital,  350 ;  353 ; 
and  individualism,  355 ;  362,  371,  379, 
386  n.,  390 ;  and  the  identity  of  public 
and  private  interests,  410;  Bodbertus 
on  his  theory  of  value,  415  n.  ;  416, 
453  n. ;  the  Marxian  school  and,  466  ; 
his  method,  466  ;  man's  right  to  the 
land,  and  his  theory  of  rent,  561 ;  564, 
566  n. ;  Sidney  Webb  and  his  theory 
of  rent,  581-583  ;  the  Fabian  doctrine 
and  his  theory  of  rent,  587 

Bichelot,  H.,  265  n. 

"Bight  to  exist,  the,"  607  n. 

"Bight  to  the  whole  produce  of  labour, 
the,"  607  n. 

"  Bight  to  work,  the,"  300,  301,  303,  319, 
599,  607  n. 

Bist,  C.f  172,  342  n.,  423  n.,  539  n. 

Biviere,  Mercier  de  la,  one  of  the 
Physiocrats,  3  ».,  5 ;  on  the  social 
order,  7 ;  on  the  "  natural  order," 
8  W.-9  n.,  9,  10  TO.,  11  ;  and  the  origin 
of  the  term  laissez-faire,  11  n. ;  on  the 
creation  of  value,  13  and  n. ;  on 
property  as  a  "  divine "  institution, 
21 ;  on  the  landed  proprietor,  23  n. ; 
on  property  as  the  parent  of  social 
institutions,  25 ;  on  the  regard  to  be 
paid  to  the  peasants,  26  n.  ;  on  the 
fallacy  that  wealth  grows  from  foreign 
trade,  28 ;  on  freedom  of  trade,  29  n.- 
30  n. ;  on  the  balance  of  trade 
theory,  31 ;  on  reciprocity,  31 ;  on 
laws,  34  n. ;  and  Catherine  the  Great, 
34 ;  on  despotism,  35  n. ;  on  taxa- 
tion, 40  n. ;  on  the  relation  of  ex- 
penditure to  production,  42  n. ;  on  the 
felicity  following  on  the  establishment 
of  the  "  natural  order,"  46  TO. ;  232 

Bochdale  Pioneers.  263  n.,  243,  244,  605 

Bodbertus,  J.  K.,  73  n. ;  and  Siamondi, 
198  ;  and  the  products  of  labour,  293  n.; 
294,  316 ;  on  the  relative  returns  of 
capital  and  labour,  341n.-342  n. ;  369  ; 
and  State  Socialism,  414-415,  428, 
431 ;  and  Lassalle,  414-415,  416,  417, 
433,  434 ;  French  origin  of  his  ideas, 
415,  416,  423;  his  works,  415  n.- 
416  TO. ;  his  political  and  economic 
views,  416-417  ;  his  social  theory,  417- 
432,  590  ;  and  the  State,  261, 418,  429- 
430,  441;  and  production,  419-421, 
423,  430 ;  and  the  utilisation  of  the 
means  of  production,  421 ;  and  distribu- 
tion, 421-428,  430-431 ;  and  labour's 
share  of  the  national  product,  425- 
426,  427 ;  and  the  "  brazen  law," 
426 ;  his  theory  of  crises,  426-427  ; 
and  the  regulation  of  national  pro- 
duction and  distribution,  427-429  ; 
and  the  State  and  economic  functions. 


430-431 ;  the  State  Socialists  and  hia 
doctrine,  430 ;  437,  443,  448  TO.,  450, 
475  ;  and  Professor  Schaffle,  590  n. 

Eodrigms,  E.,  211,  212 

Bodrigues,  0.,  203,  204  n.,  211 

Eogers,  Thorold,  52  n. 

Boscher,  W.,  106  TO.,  196,  379  and  n., 
380  n. ;  founder  of  the  Historical 
school,  381-383  ;  389,  400  n.,  402 

Eossi,  P.,  315  n.,  352,  375,  379 

Boubaud,  the  Abbe — see  Baden,  Mar- 
grave of 

Bound,  J.  H.,  vi 

Bousiers,  P.  de,  495  n. 

Bousseau,  J.  J.,  1 ;  and  the  Physio- 
crats, 6  n.  ;  and  the  natural  state  com- 
pared with  the  social  state,  7  ;  120  n. ; 
and  private  property,  200  n. ;  238  n. 
596 

Eoyal  Economic  Society,  506  n. 

"  Bural  economy,"  2, 3  n.,  5 

Buskin,  John,  196,  251,  510  and  n.,  511- 
513 

Eutten,  Father,  498  ». 

SABOTAGE,  481  n. 

Sadler,  Michael,  67 

Saint-Leon,  M.,  500  n. 

St.  Paul,  588 

Saint-Simon,  C.  H.,  and  Fourier,  201  n. ; 
quality  of  his  socialism,  201-202  ;  his 
career,  202-203  ;  his  works,  203  n. ;  his 
earlier  philosophic  system,  203 ;  his 
economic  ideas,  204;  his  "Parable," 
204-205;  on  the  future  of  the  indus- 
trial classes,  205  n. ;  on  industry, 
205  TO. ;  and  the  new  industrial  system, 
205-211,  224  ;  and  socialism,  209-211 ; 
the  Saint-Simonians  and  their  doctrine, 
211-231;  and  capital,  214;  and  A. 
Comte's  theory  of  the  three  estates, 
222 ;  and  history,  224  ;  on  politics, 
225  n. ;  on  philanthropy  in  social  re- 
organisation, 225  n. ;  Engels  on,  228 ; 
and  private  property,  217;  233,  256; 
and  Protection,  265  TO.;  290,  300; 
Proudhon  and,  311  TO.  ;  318,  323,  352, 
402,  404,  405 ;  Eodbertus  and,  418 ; 
450,  470,  475,  486 

Saint-Simonians,  the,  169,  184  ;  and 
Sismondi,  193  ;  and  the  equalitarians, 
200  n.-201  n. ;  and  their  socialist  con- 
temporaries, 201  n. ;  and  collectivism, 

201,  202,  211,  218-220  ;  their  doctrine, 

202,  213-225  ;  and  governmental  con- 
trol, 207  TO. ;  the  development  of  their 
doctrine     from     Saint-Simon's,    211  ; 
earliest  members   of  the  school,  211 ; 
organisation  of  the  school,   211-212  ; 
Enfantine    and    the    downfall   of   the 
school,  212-213  ;  and  private  property, 
199-202,  213-225,   294  n. ;   and   "  ex- 
ploitation,"  215-216  ;  and  production, 
217-218.   226-227:     and    inheritance. 


INDEX 


667 


217-218;  and  the  historical  method 
in  the  criticism  of  private  property, 
221-224  ;  their  socialism,  225,  230  n. ; 
part  played  by  members  of  the  school 
in  practical  economic  administration, 
226;  and  banks  and  credit,  226;  in- 
fluence upon  the  socialists,  227 ;  and 
distribution,  229 ;  and  the  general 
and  particular  interest,  229-230;  on 
the  disadvantages  of  the  spontaneous 
economic  forces,  230 ;  and  profits  and 
wages,  216  n. ;  and  value,  216;  com- 
pared with  the  Associationists,  231  ; 
Fourier  on,  245  ;  and  Protection, 
265  n.;  and  the  State,  289  n. ;  List 
and,  289  n. ;  293  ;  Proudhon  and, 
296  ;  297  ;  Stuart  Mill  and,  367,  372 ; 
378,  381,  415  and  n. ;  Bodbertus  and, 
421,  423;  465  n. ;  and  class  an- 
tagonism, 471  n. ;  and  the  confiscation 
of  rent,  562 

Saint-Simonism,  112 ;  Fourier  and,  201n.; 
212,  219,  254,  255 

Sainte-Beuve,  and  Sismondi,  193 ;  and 
Proudhon,  292,  295  n.,  298  n. 

Sand,  George,  263 

Sangnier,  M.,  496,  502  n. 

Sartorius,  G.  F.,  106 

Saumaise,  C.,  503  n. 

Savigny,  F.  K.  von,  882 

Saving,  Adam  Smith  on,  73 

Sax,  Professor,  522  n. 

Saxony,  281  n. 

Say,  J.  B.,  xii,  34  n. ;  and  production, 
56  n. ;  and  capital,  56  ;  and  produc- 
tive and  unproductive  works,  62, 
348  n. ;  and  the  entrepreneur,  65  n., 
113-114,  550  n.;  70;  on  Adam 
Smith's  theory  of  distribution,  80 ; 
and  distribution,  93,  113-114,  422 ;  on 
the  loss  of  England's  American  colonies, 
103-104  ;  on  the  Wealth  of  Nations, 
106;  and  Adam  Smith's  doctrines, 
107-117 ;  his  career,  107  n. ;  and  the 
Physiocrats,  108-109 ;  and  political 
economy,  110-111,  175,  178;  on 
machinery,  112,  181 ;  and  rent,  114- 
115,  551,  554  n.,  555  n.,  556;  his 
theory  of  markets,  115;  and  over- 
production crises,  115-117, 192 ;  corre- 
spondence with  Ricardo,  139  n. ;  148; 
on  the  poverty  of  the  English  worker, 
171;  Sismondi  and,  175,  177,  178, 
181 ;  and  the  relative  poverty  of  in- 
dustrial society,  193;  201  n.,  207; 
Saint-Simon  and,  209  n.,  210  n. ;  228 ; 
and  property,  228 ;  264,  265  n. ;  List 
and,  269  n. ;  279  n.,  280,  287,  298, 
311  n. ;  and  anarchy,  311  n. ;  314, 
322,  328  n.,  335  n.,  336  n.,  352  n.,  853, 
375,  379,  390,  425,  615  n.,  645 

Say,  Louis,  107  n.,  266  n. 

"Scarcity,"  521  n.,  522  n. 

Bchaffle,  A.,  438  n.,  469,  556-557,  590  n. 


Schatz,  A.,  54  n.,  357  n.,  372  n. 

Schelle,  M.,  4  n.,  11  n. 

Schmidt,  Kaspar— see  Stirner,  Mar 

Schmoller,  G.,  196,  379  and  n.,  883, 
385-386,  389  nn.,  393  n.,  395,  397,  400 
403,  406  n.,  407,  438,  443  n.,  517,  647 

Schdnberg,  G.,  439 

School  of  Social  Science,  494 

Schulze-Delitzsch,  F.  H.,  376, 434  and  n. 

Schumpeter,  Herr,  547  n. 

Schuster,  B.,  323 

Schweitzer,  Herr,  434  n. 

Science,  Bakunin  and,  628-629 

Seager,  Professor  H.  B.,  349  n. 

Secretan,  C.,  560,  600  n. 

Seebohm,  P.,  vi 

Se"gur-Lamoignon,  M.,  500  n. 

Seignobos,  C.,  405  n. 

Self-interest,  Adam  Smith  on,  as  the 
mainspring  of  progress,  86-87,  88.  89, 
92,  95,  393  ;  99 ;  the  Classical  school 
and,  393-394;  Wagner  and,  894; 
Stuart  Mill  and,  394,  404,  411 

Seligman,  Professor,  349  n.,  570  n. 

Semaines  Sociales,  500  n. 

Senior,  N.  W.,  109  n.,  168,  349-351, 
858,  862  and  n.,  871,  372,  379,  549, 
551 

Sensi,  Signer,  555  n. 

Service,  in  Bastiat's  theory  of  value, 
332-335  ;  place  of  the  term  in  econo- 
mic terminology,  3;i5 

Service-value,  Bastiat'a  theory  of,  332- 
335 

Shaftesbury,  Lord,  67 ;  Bobert  Owen 
and,  237  ;  and  Christian  Socialism,  486 

Shaw,  G.  Bernard,  579  n.,  580  and  n., 
583  n. 

Sidgwick,  H.,  329 

Sillon,  the,  502 

Simiand,  M.,  388  n.,  402  n.,  538  n. 

Sismondi,  S.  de,  x,  111,  116, 117, 169 ;  life, 
173  n.  ;  and  political  economy,  178, 
174,  175,  178,  196,  198  ;  and  Adam 
Smith,  173,  174,  410;  and  Bicardo 
and  J.  B.  Say,  174-175;  and  Malthus, 

175  ;  and  the  English  Corn  Laws,  175; 
and  the  abstract  method  in  economics, 

176  and  n.,  380 ;  and  production  and 
over-production,     176-177,     178-182 ; 
and  interest,  176  n. ;  192-193  n.,  215  ; 
and  distribution,    177-178,   185,   186, 
198,  422,  443  ;  and  the  Classical  school, 
179-182,    195-196;     and    machinery, 
180-182;  and    competition,    182-184, 
193  n.,  198,  410 ;   and  socialism,  184- 
185  ;  and  the  theory  of  the  identity  of 
individual  and  general  interests,  185- 
186,   410;    and  the   concentration   of 
capital,    187-189 ;   on   the   regulation 
of  population  by  the  revenue,  188-189 ; 
and  economic  crises.  187, 190-192,  426 ; 
and  net   and  gross   production,    189- 
190,    420;    his  reform  projects,   192- 


668 


INDEX 


Sismondi — continued 

197  ;  the  first  of  the  Interventionists, 
192 ;     influence     upon     writers     and 
movements  in  the  nineteenth  century, 
195-196 ;    influence     upon    his    con- 
temporaries, 196,197  ;  and  State  Social- 
ism, 197  ;  and  the  socialists.  196,  197- 

198  ;  Marx's  debt  to,  198  ;  and  private 
property,    198;    and    "exploitation," 
215,  216  ;   228  n.,  230,  233,  256 ;  on 
liberty,  262  n. ;  264 ;  and  Protection, 
264  re.-265  n. ;   289  ;  Stuart  Mill  and, 
367 ;    and      peasant      proprietorship, 
371  ». ;  377,  378,   415   and  n. ;  and 
production,  419,  421 ;  440,  450  ;  and 
increment  value,   453  n.  ;   475 ;    and 
guarantism,  599,  604 ;  and  Liberalism 
and  political  economy,  647 

Slavery,  Le  Play  and,  491  n. 

Smith,  Adam,  vi ;  on  the  object  of 
political  economy,  1 ;  accredited  the 
founder  of  political  economy,  2,  50- 
51,  103 ;  and  Quesnay,  3,  55  ;  Turgot 
resembles,  4  TO.,  47 ;  and  nature  re- 
garded as  the  only  source  of  value,  16  ; 
on  "  sterile  "  labour,  17  ;  his  career, 

50  TO.-52  n. ;  his   Wealth  of  Nations, 

51  et  seq.,  105 ;  intimate  with  David 
Hume,  50  TO.,  53  ;  and  the  Physiocrats, 
51  TO.,   55,  62-65,  69  ;   his  admiration 
for  Voltaire,   52  n. ;  and  Bernard  de 
Mandeville,  51 ;  and  Turgot,  55 ;  and 
the  Tableau  economique,  55  ;   and  the 
division  of  labour,   66-68,   70-71 ;   on 
labour  as  the  true  source  of  wealth,  56- 
57  ;  and  taxation,  61-62  ;  on  equality 
in  the  State,  62 ;  and  productive  and 
unproductive     workers,     62-63 ;     and 
the  superior  productivity  of  agriculture, 
63-64,  65,  67,  108,  143 ;  and  rent,  64, 
80,  141-143  ;  and  industry,  65-66,  67- 
68  ;  his  sympathy  for  the  worker,  66- 
67;     on    profits,    67-80,     114;    his 
"  naturalism,"  68-88  ;  and  the  spon- 
taneity of   economic  institutions,  69- 
88  ;  and  money,  71,  82-85,  115  ;  and 
capital,    71-73,    89-91,    272  TO.;     on 
saving,  73 ;   on  demand   and   supply, 
73-85  ;   his  theory  of  prices,   74-82 ; 
on  "  value  in  use  "  and  "  value  in  ex- 
change,"  75-77 ;    on  labour    as  the 
measure   of   value,    77-78,   149  ;   and 
cost  of  production  as  the  determinant 
of  value,  78-79  ;  his  theory  of  wages, 
80;    and    distribution,     80,    93;     on 
the   regulation   of   population   to   the 
demand,  82,  188  ;  on  banks,  85  ;   en 
self-interest  as  the  root  of  all  economic 
activity,     86-87,    88,    393;    and   the 
homo  ceconomicus,  86 ;  and  the  "  spon- 
taneous order,"  87-88  ;  on  Quesnay's 
economic  theory,  88  ;  his  "  optimism," 
88-93 ;     and    the    harmony   between 
self-interest  and  the  general  well-being 


of  society,  92,  185,  410 ;  on  the  duty 
of  the  sovereign,  93,  94,  409  ;  and  eco- 
nomic liberty,  93-97,  315 ;  on  the 
inefficiency  of  State  administration, 
94-95 ;  and  Mercantilism,  98,  169, 
314  ;  and  international  trade,  97-102  ; 
and  Protection,  98-102;  influence  of 
his  thought,  and  its  diffusion,  102- 
107;  and  Lord  North,  105;  and  Pitt, 
105;  J.  B.  Say  and,  107-118;  on  the 
basis  and  the  aim  of  political  economy, 
110 ;  and  the  entrepreneur,  114 ;  and 
Mai  thus' s  Principles  of  Population,12l; 
compared  with  Eicardo,  138  ;  and  the 
products  of  mines,  143  n. ;  and  the 
interests  of  the  landlords,  153  n. ;  and 
Free  Trade,  153,  163,  287  ;  165,  166 ; 
Sismondi  and,  173,  174,  192 ;  on 
competition,  182 ;  and  high  wages 
and  population,  189  ;  201  n.,  204,  207 ; 
Saint-Simon  and,  209  n. ;  on  govern- 
ment, 217,  625  ;  228  ;  and  property, 
228  ;  264 ;  on  the  Act  of  Union  of 
1800,  266 ;  List  and,  269  n.,  270,  271  n., 
273,  278  TO.,  279  n.,  280;  and  the  three 
stages  in  economic  evolution,  271  n. ; 
on  national  power,  271  n. ;  272 ;  on 
moral  forces,  273  n. ;  on  the  pros- 
perity of  Britain  as  the  outcome  of  her 
legal  system,  273  TO.;  322,  323,  326, 
338  TO.,  355  TO.,  371,  379,  380  and  n., 
390 ;  and  State  intervention,  408- 
410;  and  laissez-faire,  408,410;  416, 
417,  418,  423,  438  n.,  440,  516 ;  Mr. 
and  Mrs.  Webb  on  his  theory  that 
labour  is  the  cause  of  value,  581  TO.  ; 
588,  615  TO.  ;  simplicity  of  his  system, 
644 

Smith,  Prince,  376,  439 

"  Smithianismus,"  438 

Social  biology,  590  n. 

Social  Catholicism,  495-503  ;  and  co- 
operation, 496-500  ;  and  the  emanci- 
pation of  the  workers  by  themselves, 
500  ;  and  the  State,  501  ;  and  Protec- 
tion, 501  TO.;  and  socialism,  501  ; 
and  the  employer  and  the  worker,  502 ; 
compared  with  Social  Protestantism, 
503 

Social  Catholics,  494 

Social  Christianity,  509 

Social  contract,  the,  6  n. 

Social  Democratic  Federation,  579  n. 

Social  Democratic  party,  German,  Eod- 
bertus  and,  417  ;  432  ;  founded,  437 ; 
480  TO. 

Social  economics,  1,  181,  645 

"  Social  function,"  335 

"  Social  instinct,"  the,  632  ;  Kropotkin 
on,  632-633 

Social  League  of  Buyers,  500  TO. 

Social  Protestantism — see  Christian  So- 
cialism 

"  Social  workshops,"  Blanc  and,  301 


INDEX 


669 


Socialism,  xi ;  Adam  Smith  regarded  as 
the  father  of,  79  n. ;  Adam  Smith  a 
forerunner  of,  92 ;  Ricardo's  theory 
of  value  the  starting-point  of  modern, 
138 ;  the  Marxian  theory  of  surplus 
value  and,  140 ;  and  the  French  Revo- 
lution, 199  n.-200  n. ;  equalitarian, 

200  n.;  the  Saint- Simonians  and,200  n.- 

201  n.,   212,  225,   227,   230  n.,  231; 
Saint-Simon  and,  201,  202, 209, 210  n. ; 
Saint-Simon  the  father  of,  203 ;  Robert 
Owen  and,  235  ;    origin  of  the  term, 
235   n.,   263   and    n.;    Wm.    Thomp- 
son   and,    244  ;     Leroux    and,    263  ; 
Proudhon     and,     290-291,     296-299, 
315;    and    the   Revolution    of    1848, 
300-307;       Marx     and,      320,      470; 
France     the     classic    land    of,     323 ; 
Bastiat  and,  323  n.,  329 ;  Stuart  Mill 
And,  352   n.,   353,   358;     the   Liberal 
school   and,   354  ;    Reybaud  on,   354 ; 
revival  of,  377 ;    Marx's  Kapital  and, 
377;      Rodbertus     and,     417;    State 
Socialism     and,    431 ;     Lassalle    and, 
433  ;  the  Christian  schools  and,483-485; 
the  Social  Catholics  and,  500;  the  Sillon 
and,  502  ;  the  Christian  Socialists  and, 
509  ;  modern  changes  in,  515-516  ;  in 
England    in    mid-nineteenth   century, 
579  ;  of  the  Fabian  Society,  vii,  580  n.- 
581  n.,  584-587  ;  Sidney  Webb  on  the 
present  realisation  of,  585;  "juridical 
socialism,"   606,  607  n. ;   criticism  of 
solidarity,  611  ;  anarchism   and,   640, 
641 ;  and  violence,  641 ;  and  the  State 
and  private  property,  642 

Socialists,  favour  Adam  Smith's  theory 
of  value,  75  ;  Sismondi  reckoned 
among,  184 ;  Saint-Simon  reckoned 
among,  210  n. ;  Proudhon  and,  296- 
297  ;  and  the  Revolution  of  1848,  300  ; 
335  ;  and  State  Socialism,  414 ;  Rod- 
bertus and,  417 ;  and  capital,  459- 
460  ;  F.  D.  Maurice  on  the  motto  of 
the  socialist,  504  n. ;  and  interest  and 
rent,  568,  579 

Society,  the  reality  of,  618,  619  n. ;  Kro- 
potkin  on,  625  n.,  630,  631  n. ;  Baku- 
nin  on,  625  n.-626  n.,  630,  631  n. ; 
the  anarchist  conception  of,  629- 
636  ;  Proudhon  and,  630,  631  n. ; 
Jean  Grave  and,  630,  631  n. ;  and 
government,  631 

Sociological  analogy,  the,  590-591 

Sociology,  388,  392,  404,  590 

Solidarity,  xv ;  in  France,  136  n.,  516; 
Protection  and,  289  n.,  602;  Proud- 
hon and,  317 ;  the  Liberal  school 
and,  325;  Bastiat  and  the  law  of, 
344-345 ;  origin  of  the  term,  344  n., 
587 ;  modern  conception  of,  344 ; 
Carey  and,  345 ;  and  individualism, 
356  n. ;  State  Socialism  and,  439, 
592,  601,  602-603;  La  Play's  new 


school  and,  495 ;  Gounelle  on,  508  n. ; 
the  Christian  Socialists  and,  508 ;  de- 
velopment of  the  ideal,  587  ;  the 
ancients  and,  588-589 ;  heredity  and, 
588;  A.  Comte  and,  589;  bacteri- 
ology and,  589  ;  the  sociological  ana- 
logy and,  590-591 ;  growth  and  uni- 
versality of,  591-692;  the  Solidarity 
school,  592  n.-593  n. ;  Gide  on,  593  n. ; 
a  new  watchword,  593 ;  M.  Bourgeois 
and,  593-594,  596,  597-599  ;  and 
natural  solidarity,  594-599;  pro- 
gress of  the  movement,  593-594  ; 
Durkheim  and,  599-600 ;  a  move- 
ment  towards  universal  unity,  600- 
601  ;  practical  applications  of,  601- 
607 ;  fiscal  reform  and,  602 ;  and 
association,  602,  613-614  ;  the  syndi- 
calists and,  603 ;  the  mutualists  and, 
603-604;  and  co-operation,  604;  the 
ftcole  de  Nlmes,  605  n. ;  and  the 
mutual  credit  society,  606  ;  and  private 
property,  606  ;  and  jurisprudence, 
606 ;  criticism  of,  607-614 ;  the 
Liberal  school  and,  607-608;  evolu- 
tion and,  609  ;  and  collective  respon- 
sibility for  misdemeanour,  610  ;  the 
moralists  and,  610-611 ;  socialist 
criticism,  611 ;  its  moral  influence, 
611-612;  and  individuality,  612- 
613;  and  exchange,  613-614;  dis- 
tinguished from  charity,  614  n.  ;  the 
anarchists  and  social  solidarity,  630 ; 
632 

Solidarist,  or  Solidarity,  school,  592  n.- 
593  n.,  601 

Solvay,  E.,  242,  318-319 

Sombart,  W.,  271  n.,  386 

Sorel,  G.,  209,  321,  447-448,  466  nn., 
467  n.,  473  n.,  474  n.,  479  nn.,  480  n., 
481  nn.,  482  and  nn.,  483,  515,  638  n., 
641,  642 

Souchon,  A.,  xi 

Sovereign,  the,  Adam  Smith  on,  93,  94, 
409 

Soeialpolitik,  178 

Spain,  anarchism  in,  640 

Spence,  T.,  560  and  n. 

Spencer,  Herbert,  xiii,  356,  376,  560, 
590  nn. 

Spontaneity  of  economic  institutions, 
Adam  Smith  and,  68-85,  87,  88,  89 

Stael,  Mme.,  173  n. 

Stangeland,  C.  E.,  121  n. 

Stanislaus  II,  King  of  Poland,  and  the 
Physiocrats,  5 

State,  the,  in  the  Mercantilist  view,  27 ; 
in  the  Physiocratic  view,  27 ;  the 
functions  of,  in  the  Physiocratic  doc- 
trine, 33-37  ;  Adam  Smith  on  the  func- 
tions of,  95 ;  the  sole  inheritor  of 
property,  in  the  Saint-Simonians1 
system,  223  ;  Blano  and,  261,  262  ; 
Dupont- White  and,  408  n.,  440,  441 : 


670 


INDEX 


State,  the — continued 

Walras  and,  413 ;  Bodbertns  and,  418- 
419,  429-431  ;  Hegel  on,  435  n.  ; 
Fichte  and,  435  W.-436  n. ;  the  Con- 
gress of  Eisenach  and,  437 ;  Wagner 
and,  438  n.,  439-440;  the  duties  of, 
under  State  Socialism,  439;  in- 
capacity of,  as  an  economic  agent,  439  ; 
and  the  individual,  442-443  ;  the 
Christian  schools  and,  484 ;  Le  Play  and, 
488 ;  the  Social  Catholics  and,  501 ; 
Carlyle  on  the  Classical  ideal,  511  ; 
the  anarchists  and,  615,  623-624,  625, 
626,  627,  630,  641 ;  syndicalism  and, 
641 

State  intervention,  xv,  407  et  seq. ;  Adam 
Smith  and,  94-97,  408-410;  Malthus 
and  Bicardo  and,  164 ;  Sismondi  and, 
197,413;  the  French  Liberal  school 
and,  325;  Eastiat  and,  325  n.,  408- 
409 ;  377,  378 ;  Stuart  Mill  and,  411, 
413;  Cournot  and,  413;  Lassalle  and, 
434-435 ;  Kingsley  on,  605  n.  See 
State  Socialism 

State  Socialism,  xi,  xv,  197,  221,  259, 
261,  262,  804-305,  346,  377,  387, 
889  n.,  407 ;  origin  of,  410,  413,  438 ; 
not  simply  an  economic  doctrine,  414  ; 
Rodbertus  and,  414-415,  417,  428,  431, 
432  ;  Lassalle  and,  414,  432  ;  Wagner 
and,  414  ;  and  socialism,  431 ;  Andler 
and  the  philosophical  origin  of,  435  n. ; 
Fichte  and,  435  n.  ;  principles  and 
characteristics  of  the  movement,  436- 
448 ;  and  the  Classical  school,  438 ; 
and  solidarity  and  Lassalle,  439  ;  and 
government  and  the  individual,  439- 
443  ;  and  distribution,  443-444  ;  and 
production,  444 ;  Bismarck  and,  445  ; 
in  Germany,  445-446 ;  influence  in 
politics,  447 ;  and  economic  Liberalism, 
447 ;  syndicalism  and,  447-448  ;  the 
Christian  schools  and,  485 ;  and 
economic  theory,  515  ;  modern  develop- 
ment of,  516 ;  the  Fabians  and,  586 ; 
592,  593  n. ;  and  solidarity,  601,  602- 
603 

Stationary  state,  Stuart  Mill  and,  373- 
374 

Statistics,  the  science  of,  and  economics, 
407  n. ;  645-646 

Statute  of  Apprentices,  the,  104, 170 

Statutes  of  the  International  Brotherhood, 
639 

Statutes  of  the  International  Socialist 
Alliance,  639 

Stein,  H.  F.  K.,  106  n. 

Stein,  L.  von,  294  n. 

"  Sterile  classes,"  the,  in  the  Physiooratic 
system,  14, 21,  24  ;  Adam  Smith  and,  57 

Sterile  labour,  in  the  Physiocratic  system, 
16-17 

Stewart,  Dugald,  62  n. 

Stiegler,  M.,  692  n. 


Stirner,  Max  (Kaspar  Schmidt),  615-619, 
622-623,  628,  630 

Stoker,  Pastor,  507 

Storch,  H.  F.  von,  118  n.,  379 

Strong,  J.,  506  n. 

Stumm,  Baron,  507  n. 

Sully,  Due  de,  17 

Supply,  price  and,  519 

Surplus  labour,  Marx's  theory  of,  450- 
459,  474-475 

Surplus  value,  Marx's  theory  of,  184, 198, 
228,  294,  450-459 ;  Sismondi  and,  184- 
185,  198,  475;  decline  of  the  theory 
of,  516 

Surplus  values,  the  taxation  of,  569-570 

Switzerland,  Christian  Socialism  in, 
607 

Syndicalism,  321,  447,  448,  472  n.,  473, 
479-483,  491 ;  the  Social  Catholics  and, 
498  and  n. ;  the  Sillon  and  the  C.G.T. 
and,  502 ;  and  solidarity,  603 ;  and 
anarchism,  619  n.,  641-642  ;  and  the 
State,  641-642  ;  its  ideal,  642 

Syndicat,  the,  480-481 

Synthetic  socialism,  573 

Syntheticism,  573 

Tableau  economique,  Sn.,  5,  18-19,  20  n., 
21,  162,  534 

Taillandier,  Saint-Bend,  616  n. 

Tariffs,  in  France,  266,  269,  280-281 ;  in 
Germany,  266-269,  280-281;  in  the 
United  States,  269;  the  economic 
nature  of,  282 

Taxation,  the  Physiocratic  theory  of,  38- 
45  ;  Adam  Smith  and,  61-62  and  nn., 
102 ;  development  of  the  theory  of, 
645 

Theory,  economic,  recent  revival  of,  615 

Thierry,  A.,  203,  211 

Thiers,  L.  A.,  303 

Thomas,  6.,  302  and  n. 

Thomas,  P.  F.,  263  n. 

Thompson,  B.,  156  n. 

Thompson,  W.,  194,  201  n.,  244,  450  n. 

Thornton,  W.  T.,  361,  371  n. 

Thiinen,  J.  H.  von,  148  n.,  352,  558 

Tocqueville,  A.  C.  de,  303 

Todt,  Pastor,  507 

Tolstoy,  Count  Leo,  510,  511, 512, 513-514 

Tooke,  T.,  109  n. 

Torrens,  Colonel,  349  n. 

Tourville,  the  Abbe  de,  494,  495  ». 

Toynbee,  A.,  196,  374,  379,  386  n.,  387 

Trade,  the  Physiocrats  and,  27-33 

Trade,  Free — see  Free  Trade 

Trade  unionism,  Bobert  Owen  and, 
236  n.;  Stuart  Mill  and,  361,  362  n. ; 
the  Neo-Marxians  and,  479  ;  Le  Play 
and,  491 ;  496  n.,  504 ;  Durkheim  and, 
600 ;  the  syndicalists  and,  603,  642  ; 
the  French  anarchists  and,  640 

Travail,  Le,  co-operative  society,  257  n. 

Treiteclike,  H.  G.  von,  443  n. 


INDEX 


671 


Trosne,  G.  P.  Le,  one  of  the  Physiocrats, 
4  n. ;  on  the  earth  as  the  sole  produc- 
tive source,  12  n.,  13 ;  and  the  "  net 
product,"  14  n.,  15  n. ;  on  the  Tableau 
economique,  19  ;  on  exchange,  27  n. ;  on 
Free  Trade,  29  n. ;  49,  118  n. 

Trusts,  Ollivier  on,  325 

Tucker,  J.,  54 

Turgot,  A.  B.  J.,  one  of  the  Physiocrats,  4 
and  n. ;  on  the  universality  and  im- 
mutability of  the  "  natural  order,"  10; 
and  the  origin  of  the  term  laitsez-faire, 
11  n. ;  12  n.  ;  on  artisans  and  agri- 
culturists, 14  and  n. ;  on  mines  and  the 
"  net  product,"  14 ;  on  the  circula- 
tion of  wealth,  18;  and  the  Tableau 
economique,  20  n. ;  and  property,  25  n. ; 
on  the  "  good  price,"  30  n. ;  on  Pro- 
tection, 31  n. ;  and  the  edict  establishing 
Free  Trade  in  corn,  32  ;  and  interest, 
33,  50  n. ;  distinguished  from  the  other 
Physiocrats,  33,  46-47 ;  on  industry 
and  agriculture,  37  n. ;  on  the  burdens 
of  the  poor,  42  n. ;  and  the  "  iron 
law,"  42,  157,  453  n. ;  on  value,  46- 
47 ;  and  Condillao  and  Galiani,  47 ; 
60 ;  acquainted  with  Adam  Smith,  51  n., 
65 ;  117 ;  and  the  law  of  diminishing 
returns,  146-147  n.,  340 ;  222  n.,  228  n., 
298 

"  UNEARNED  INCREMENT,"  rent  is,  545 ; 
the  confiscation  of,  558-570 

United  States,  zii ;  increase  of  popula- 
tion in,  124  n. ;  growth  of  per  capita 
wealth  of  the  population  in,  131 ; 
and  tariffs  and  Protection,  269,  278- 
279 ;  List  on  the  economic  condition 
of,  279 ;  cultivation  and  rents  in, 
339  ;  Christian  Socialism  in,  506 

Unity,  the  movement  towards  universal, 
600 

University  economists,  436 

Ure,  A.,  171  n. 

Usury,  the  Catholic  Church  and,  503  n. 

Utilitarian  Radicals,  586 

Utilitarian  school,  352 

Utility,  social,  24,  91 ;  Dunoyer  and,  348 
and  n. 

Utility  theory,  328  n. ;  Bastiat  and,  335- 
338 

Utopia,  More's,  246 

Utopian  socialism,  232 

VALUE,  the  accretion  of,  constitutes  pro- 
duction, 16 ;  nature  the  only  source 
of,  16;  the  Physiocrats  and,  46, 
49;  Turgot  on,  46-47;  Galiani  on, 
47  ;  Condillac  and,  48-49, 74,  75  ;  Adam 
Smith's  theory  of,  74-80, 149 ;  Ricardo's 
theory  of,  138,  140-141,  149-151,  240, 
332  ;  Sismondi  and,  184-185  ;  Marx 
tnd,  185,  293  n.,  466  and  n.,  474,  583  ; 
Marx's  theory  of  surplus  value,  184, 


450-459;  Proudhon  and,  293  n.; 
Bastiat's  theory  of  service-value,  832- 
335,  338;  Carey  and,  332;  Ferrara 
and,  333  n.;  in  Bastiat's  utility 
theory,  335-338  ;  the  Classical  law  of, 
360,  558;  Rodbertus  and,  415  n. ; 
Aristotle  and,  451  n. ;  determined  by 
cost  of  production,  520,  526 ;  defini- 
tion of,  523  ;  the  Classical  school  and, 
630  n. ;  the  Mathematical  school  and, 
630  n. ;  Aupetit  and,  530  n. 

"  Value  in  use,"  and  "  value  in  exchange," 
75-76,  451 

Value,  surplus — see  Surplus  value 

Vandervelde,  E.,  221,  470  n. 

Varlin,  M.,  459  n. 

Vereinfilr  Sotialpolitik,  437 

Vidal,  F.,  259,  304-305,  414,  420  n. 

Yilleneuve-Bargemont,  Vicomte  A.  de, 
197 

Villerme,  L.  R.,  171,  491  n, 

VUley,  E.,  327  ». 

Vinet,  A.  R.,  509 

Voltaire,  and  the  Physiocrats.  6 ;  32 ; 
hi&L'Hommeavec  Quarante  Ecus, tin.; 
43 ;  Adam  Smith  and,  51  n. ;  52  n. 

WAGE  fund  theory,  Stuart  Mill  and,  361- 
362,  374 ;  Walker  and,  362  n.,  549 ; 
Cairnes  and,  374  ;  456 

Wages,  the  Physiocrats  and,  43 ;  Con- 
dillac on,  49-50 ;  Adam  Smith  on  the 
relation  of,  to  rent,  64  n. ;  Smith's 
theory  of,  80;  Ricardo  and,  114,  157- 
163;  Sismondi  and,  176  n. ;  Stuart 
Mill  and,  360  n.,  369-370;  353;  the 
law  of,  of  the  Classical  School,  360- 
362 ;  Cobden  on,  360-361  ;  the  "  bra- 
zen law  "  of,  361,  426.  433,  453  n.,  528; 
Bdhm-Bawerk  and  the  Classical  school 
and,  520 ;  final  utility  and,  527-528 ; 
the  productivity  theory  of,  527-528, 
649-550 ;  the  Hedonists  and,  541  ; 
relation  of,  to  profit,  550-551 ;  and 
interest,  Henry  George  on,  665 ; 
relation  of,  to  the  increase  in  rents, 
666  and  n. 

Wagner,  A.,  222,  393  n.,  394,  396  nn., 
401  n.,  403,  414,  416,  431  n.,  433  n. ; 
and  State  Socialism,  438  and  n.,  439, 
440-441,  443  n.,  444  ;  and  the  State 
and  the  individual,  442 

Wakefield,  Gibbon,  34'J  n. 

Walker,  A.,  550  n. 

Walker,  F.,  362  n.,  549-552 

Wallace,  A.  R.,  and  land  nationalisation, 
561,  677 

Wallas,  Graham,  159  n. 

Walras,  L.,  on  Free  Trade,  30;  75; 
J.  B.  Say  and,  114 ;  and  land  na- 
tionalisation, 155,  561,  571,  672  n., 
573-577  ;  and  "  scarcity,"  351 ;  521  nn 
5-J2  n.;  876,  380,  3H2  and  n. ;  on 
the  State,  413  ;  4'J5,  529  n. ;  his  econo- 


672 


INDEX 


Walras,  L. — continued 

mic  system,  533-536,  541-542;  537, 
538  ».,  540  n.,  544 ;  and  rent  and 
profit,  552;  and  the  individual  and 
the  State,  573-574  ;  and  the  confisca- 
tion of  rent,  574-577  ;  631  n. 

War  of  Independence,  American,  103- 
104,  202 

Waring,  Colonel,  253  n. 

Watt,  James,  65 

Wealth,  the  Physiocratio  conception 
of  the  circulation  of,  18-26 ;  a 
material  element,  in  the  Physiocratio 
view,  27 ;  Quesnay  regards  agricul- 
ture as  the  source  of  all,  56  ;  Adam 
Smith's  view  of  the  origin  of,  56-57 ; 
Adam  Smith  on,  83  ;  solely  a  product 
of  the  soil,  in  the  Physiocratio  view, 
348 

Wealth  of  Nations,  51  et  seq.,  353 

Webb,  Mr.  and  Mrs.  Sidney,  170,  221, 
387,  580,  581,  583,  584,  585,  586 

Weber,  Max,  381  n. 

Weill,  G.,  202  n.,  203  n.,  226  n. 

Weitling,  W.,  323 


Wellington,  Dnke  of,  366 

Wells,  H.  G.,  680 

West,  SirE.,  147  n.,  149  n. 

Weulersse,  G.,  5  n.,  22  n.,  26  n. 

Wieser,  F.  von,  522  n. 

William  II,   Emperor  of  Germany,  446, 

507 

Wilson,  G.,  96  n. 
Wirth,  M.,  416  n.,  417  n. 
Wollemborg,  508  TO. 
Wolowski,  L.,  304 
Woman  question,   Saint- Simonism  and, 

254  ;  Fourier  and,  254 
"  Working  men's  associations,"  305-306, 

319 

Worms,  B.,  590  n. 
Wiirtemberg,     Tariff     Union     between 

Bavaria  and,  268 

YOUNG,  A.,  136  n.,  371 
Yule,  Udny,  407  n. 

ZOLA,  E.,  254  n. 

Zollverein,  formation  of  the,  268 ;  280 

Zollvereinsblatt,  280  n.,  288 


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